Bookkeeping & Write-up

Unlike Social Security, there is no limit on wages or earned income for Medicare purposes. 1.45% is withheld on every dollar one makes. The employer is required to match this withheld amount.

Beginning 1/1/11 you must use electronic funds transfer to make all federal tax deposits for employment tax's, corporation tax's and excise tax's. Forms 8109- and 8109-B Federal Tax Deposit Coupons can not be used after 12/31/10.
Generally electronic funds transfer are made using the EFTPS system. If you do not use EFTPS you can arrange for a trusted third party to make deposits on your behalf such as a payroll service or financial institution.
To enroll in EFTPS visit www.eftps.gov or call 1-800-555-4477 1-800-555-4477 . Speak to your local CPA about assisting you in signing up to the Federal Tax Payment System.

Generally, cash, petty cash, supplies, prepaid expenses, accounts and notes receivable, inventories and any other item that can be converted into cash within one year are classified as current assets. Cash is any medium of exchange that a bank will accept at face value. Notes Receivables are claims against debtors evidenced by a written promise to pay a certain sum of money at a definite time to the order of a specified person. Accounts receivable are claims against debtors which are less formal than note receivables that arise from sales of services or merchandise on account.

Generally, tangible assets used in business that are relatively fixed or of a permanent nature are termed fixed assets. Examples are land, buildings, equipment, machinery, fixtures, furniture, office equipment, and tools. The cost of the fixed asset is recorded in one account and the associated accumulated depreciation is recorded in another account.

A company's health or financial position is shown on a balance sheet. The balance sheet reflects a business' financial position at a particular date in time. The typical balance sheet displays the business' assets, liabilities and stockholders' equity. Assets and liabilities are classified into current and non-current categories. Assets are normally debit balances and includes what a business owns. Current assets generally relates to anything that can be converted into cash within one year. Fixed assets are more permanent, referred to as long term,(more than 1 year) which includes such assets as buildings, land, and equipment. Liabilities are normally credit balances and what the business owes. Current liabilities generally means anything which is owed within one year. Long term liabilities are debts expected to be paid back after one year, such as mortgages and loans. The difference between assets and liabilities is called stockholders' equity or net worth. Therefore the basic balance sheet equation is - Assets minus Liabilities = Stockholders' Equity or Assets = Liabilities plus Stockholders' Equity. Most audited financial statements are comparitive in nature illustrating a period verses a prior year period. Footnotes to the balance sheet are used to achieve adequate, informative disclosure when more detail is required.

The income statement is the profit and loss statement of a business. It shows the performance of a business over a period of time such as a month or quarter or year. The income statement is preferable prepared in comparitive form to show changes from the preceeding year. Extraordinary gains and losses of material amount should be shown seperately. Also for public companies earnings per share should be presented on the income statement. The basic accounting formula is Sales Revenues minus Expenses = Income or Loss.

The Statement of Retained Earnings reconciles the net income earned during a given period and any cash dividends paid with the change in retained earnings between the start and end of that period. The basic equation is Beginning Balance plus Net Income or loss for the period, minus Dividends Declared = Ending Balance. The Statement of Retained Earnings is frequently combined with the Income Statement.

Every business transaction affects a minimum of two accounts. The sum of the debit and credit for each transaction is inherent in the basic accounting balance sheet equation, Assets = Liabilities plus Capital. It is because of this duality that the bookkeeping system is known as the double-entry bookkeeping system. The rules of debit and credit posting to the balance sheet accounts are that debits signify increases in asset accounts, and decreases in liability and capital accounts. The credits signify decreases in asset accounts, and increases in liability and capital accounts.

The process of recording a transaction into a journal is termed journalizing. In a two column journal, it should include the date, the debit (including the title of the account and the amount), the credit (including the title of the account and the amount), followed by an brief explanation for the not obvious entries. Note that the amount of the debit and credit entries must always be equal. Also, it is recommended that the title of the entries should be the same as the accounts used in the journal.