Accounting Blog

Accounting Training, Tips, and News

What Is a Not-for-Profit Organization?

There are many organizations, charities and community centers that work to fulfill specific objectives or goals but not to earn a profit. These organizations are called not-for-profit organizations or nonprofits. Their primary goal is to offer services or products for little or no profit, and some may not earn any money for what they offer.

What Is an IPO?

An Initial Public Offering or IPO is the initial or introductory sale of a company’s stocks to the general public. All business entities have some form of ownership of stocks. Based on ownership, business entities fall under two categories: private and public.

What Are Business Expenses?

Taxes. We all want to pay less. With careful attention, you can. When you know what business expenses can be deducted, you’ll be certain you’re paying no more than needed.

The IRS defines business expenses as “the costs of carrying on a trade or business … usually deductible if the business is operated to make a profit.” Read on to learn how to maximize your profit when you use legitimate business expenses to reduce your taxes.

What Is Gross Margin?

As a business owner or manager, you calculate a variety of figures to determine the health and longevity of your business. One of these figures is gross margin, which is an important factor for you when assessing your business risk and profitability … or when you are setting prices for your goods or services.

What Is an Audit Trail?

When you maintain a complete and accurate audit trail, you can [theoretically] have a stress-free audit process.

Every day, your business records the transactions for that day. It is important to record the transactions correctly and have adequate documentation to support your entries. This documentation acts as an audit trail. There are multiple types of audit trails; this article is about audit trails in your accounting for small business.

What does an audit trail include?

An audit trail is the set of source documents that validate the transactions recorded on your business’s books. When you or your accountant records the business’s transactions, you base the entries on an event or activity of the business. An event can be anything from a daily sales transaction to a building acquisition to the disposal of equipment.

The documentation for an event or activity may involve one document or a series of documents that support the transaction. Examples of documentation include:

An Overview of Employee Stock Ownership Plans (ESOP)

An ESOP, or Employee Stock Ownership Plan, is a popular way give employees a stake in their company’s success. As of 2014, there were approximately 7,000 employee stock ownership plans benefiting roughly 13.5 million employees in the U.S., according to the National Center for Employee Ownership (NCEO).

Advantages for Employees

For employees, an ESOP creates an additional source of income, and some companies match employee savings with stock from the ESOP. Employees can use the ESOP as an addition to their small business retirement plan, and cash in when they leave the company. While employees may owe tax on their distributions, they can roll them over to a type of IRA. Perhaps most importantly, however, an employee stock ownership plan can give employees a stake in the company’s success and even a say in the company’s affairs in some cases.

What Is a CPA?

If you are in business, you have likely considered using an accountant or a CPA to handle certain aspects of your business finances. But did you know that not every accountant becomes a CPA? It’s important to understand the difference, especially since inaccuracies, misstatements, and errors in financial documents can affect core functions within a company. You should certainly know more about who is handling your finances.

What Are Bylaws?

Bylaws are legal documents that comprehensively outline the rules, regulations, and guidelines of any organization.  Bylaws are often filed along with a corporation’s Articles of Incorporation when the business is first formed.

Bylaws include the structure of the organization, and they are primarily established to protect the rights and itemize the duties and responsibilities of  the directors, CEO, stockholders, and various committee members.

Misclassifying Independent Contractors

It’s no secret that the IRS is cracking down on small business owners who are misclassifying independent contractors. Employers need to be aware of the dangers of misclassifying employees as independent contractors (and vise versa). When this happens, the employer does not pay their share of Social Security tax and Medicare tax, unemployment taxes, Worker’s Compensation premiums, and other benefits that otherwise would be available to employees.

Instead, you pay all money earned by the independent contractor on an untaxed basis. It is then the responsibility of the independent contractor to file and pay the appropriate taxes, and to secure their own insurance and benefits.

The IRS has found that when a self-employed worker is responsible for paying his/her own taxes, etc., many times the cost is not as much as it would be when the employer is paying the correct tax amount. This is primarily due to workers taking full advantage of any potential business deductions so that they pay less in taxes. Hence, the IRS is strict about misclassifications and imposes some hefty penalties.

Cash-basis Accounting: the Pros and Cons

The way you do your business’s accounting may be second nature to you. You may have begun tracking your finances in a purposeful, informed manner, or you may have stumbled into an accounting method by default.

Whichever way you’re handling your business’s accounting, it’s likely you made a conscious or unconscious choice to use one of the two major methods: cash basis accounting or accrual accounting.

For smaller businesses, cash basis accounting does have several advantages over accrual methods.

What Is a Not-for-Profit Organization?

There are many organizations, charities and community centers that work to fulfill specific objectives or goals but not to earn a profit. These organizations are called not-for-profit organizations or nonprofits. Their primary goal is to offer services or products for little or no profit, and some may not earn any money for what they offer.

What Is an IPO?

An Initial Public Offering or IPO is the initial or introductory sale of a company’s stocks to the general public. All business entities have some form of ownership of stocks. Based on ownership, business entities fall under two categories: private and public.

What Are Business Expenses?

Taxes. We all want to pay less. With careful attention, you can. When you know what business expenses can be deducted, you’ll be certain you’re paying no more than needed.

The IRS defines business expenses as “the costs of carrying on a trade or business … usually deductible if the business is operated to make a profit.” Read on to learn how to maximize your profit when you use legitimate business expenses to reduce your taxes.

What Is Gross Margin?

As a business owner or manager, you calculate a variety of figures to determine the health and longevity of your business. One of these figures is gross margin, which is an important factor for you when assessing your business risk and profitability … or when you are setting prices for your goods or services.

What Is an Audit Trail?

When you maintain a complete and accurate audit trail, you can [theoretically] have a stress-free audit process.

Every day, your business records the transactions for that day. It is important to record the transactions correctly and have adequate documentation to support your entries. This documentation acts as an audit trail. There are multiple types of audit trails; this article is about audit trails in your accounting for small business.

What does an audit trail include?

An audit trail is the set of source documents that validate the transactions recorded on your business’s books. When you or your accountant records the business’s transactions, you base the entries on an event or activity of the business. An event can be anything from a daily sales transaction to a building acquisition to the disposal of equipment.

The documentation for an event or activity may involve one document or a series of documents that support the transaction. Examples of documentation include:

An Overview of Employee Stock Ownership Plans (ESOP)

An ESOP, or Employee Stock Ownership Plan, is a popular way give employees a stake in their company’s success. As of 2014, there were approximately 7,000 employee stock ownership plans benefiting roughly 13.5 million employees in the U.S., according to the National Center for Employee Ownership (NCEO).

Advantages for Employees

For employees, an ESOP creates an additional source of income, and some companies match employee savings with stock from the ESOP. Employees can use the ESOP as an addition to their small business retirement plan, and cash in when they leave the company. While employees may owe tax on their distributions, they can roll them over to a type of IRA. Perhaps most importantly, however, an employee stock ownership plan can give employees a stake in the company’s success and even a say in the company’s affairs in some cases.

What Is a CPA?

If you are in business, you have likely considered using an accountant or a CPA to handle certain aspects of your business finances. But did you know that not every accountant becomes a CPA? It’s important to understand the difference, especially since inaccuracies, misstatements, and errors in financial documents can affect core functions within a company. You should certainly know more about who is handling your finances.

What Are Bylaws?

Bylaws are legal documents that comprehensively outline the rules, regulations, and guidelines of any organization.  Bylaws are often filed along with a corporation’s Articles of Incorporation when the business is first formed.

Bylaws include the structure of the organization, and they are primarily established to protect the rights and itemize the duties and responsibilities of  the directors, CEO, stockholders, and various committee members.

Misclassifying Independent Contractors

It’s no secret that the IRS is cracking down on small business owners who are misclassifying independent contractors. Employers need to be aware of the dangers of misclassifying employees as independent contractors (and vise versa). When this happens, the employer does not pay their share of Social Security tax and Medicare tax, unemployment taxes, Worker’s Compensation premiums, and other benefits that otherwise would be available to employees.

Instead, you pay all money earned by the independent contractor on an untaxed basis. It is then the responsibility of the independent contractor to file and pay the appropriate taxes, and to secure their own insurance and benefits.

The IRS has found that when a self-employed worker is responsible for paying his/her own taxes, etc., many times the cost is not as much as it would be when the employer is paying the correct tax amount. This is primarily due to workers taking full advantage of any potential business deductions so that they pay less in taxes. Hence, the IRS is strict about misclassifications and imposes some hefty penalties.

Cash-basis Accounting: the Pros and Cons

The way you do your business’s accounting may be second nature to you. You may have begun tracking your finances in a purposeful, informed manner, or you may have stumbled into an accounting method by default.

Whichever way you’re handling your business’s accounting, it’s likely you made a conscious or unconscious choice to use one of the two major methods: cash basis accounting or accrual accounting.

For smaller businesses, cash basis accounting does have several advantages over accrual methods.