Closing out the year


 End of year purchases

Any inventory (items for resale) you purchase is not deductible until you sell those items. Some businesses will try to arrange a large purchase of merchandise for resale, mistakenly thinking that will help them reduce taxes, but this does not work. This is true whether you are on the cash or accrual basis. 

If you purchase equipment, computers, furniture, or other tangible depreciable property, you need to remember the “placed in service” rule. Congress has allowed accelerated depreciation and Section 179 deductions, meaning that you can take a deduction for the full amount of such purchases. You can’t deduct depreciable property that you purchase at the last minute and leave sealed in the box.

 Cash or Accrual accounting

If your business is on Accrual Basis accounting, you’ll record income when it’s billed and recording expenses when they are incurred. This means the dates on invoices you send to customers and the dates of invoices your vendors send you are important. There’s not much related to receipts and disbursements that accrual basis taxpayers can do as far as end of year planning; just pay close attention to those dates.

For cash basis businesses, anything you receive from customers prior to December 31st is income for the current year. Payments you make for business expenses before December 31 are deductions in the current year. You are not responsible for the business schedule of those to whom you owe money. In order to take a deduction for a payment you make by check this year, there should be a reasonable chance that the vendor can receive it and deposit it by the end of the year. For credit card payments, the bill from the credit card company will give the date, and you will get credit for any charge posted by December 31.

Which accounts get closed at the end of a fiscal year?

The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains, losses), the sole proprietor's drawing account, the income summary account, and any other account that is used for keeping a tally of the current year amounts. Since the temporary accounts are closed at the end of each fiscal year, they will begin the new fiscal year with zero balances.

The accounts that do not get closed (their balances are carried forward to the next accounting year) are referred to as permanent accounts.

Holiday Season Reminders


Gifts to employees

Bonuses are entirely voluntary, but if you choose to give them to your employees, here are some guidelines. 

Non-cash gifts:

Food items fall under special, and very favorable, rules. They are not counted as income to the employee, but the cost is deductible to your business.

Non-cash, non-food gifts to employees with a value of more than $25.00 are considered income to the employee and will have to go on his or her Form W-2 at the end of the year. While they are still deductible for the business, they will require withholding for the employee, and you will have to pay the employer match.

Cash gifts:

Any gift in cash, by check, or any cash equivalent has to go through your payroll system. There are no exceptions. 

If you’d like to give an employee a check for an even dollar amount, call your payroll service and ask them to do a “net check.” Their software will figure out the payroll taxes and give you a paycheck where the final amount is the even number you specify.

Fixed assets and depreciation schedules

A useful life of more than a year is the test for whether an asset should be put on your balance sheet and depreciated, rather than being deducted as a regular expense in the current year. Simple office equipment like tape dispensers and staplers have a useful life of many years. Since it would be silly to depreciate office supplies, most businesses use a standard cost level (the most common is $500, though there are new rules that allow up to $2,500) to decide what to depreciate versus what to count as an expense.



Mistakes to avoid before the Holiday Season


Managing all of your accounting in-house

Do you handle all of your bookkeeping and accounting in-house? When you run an extremely small business with limited revenue, it can be tempting to lower costs by handling your accounting on your own. While taking care of your accounting yourself might seem like a great way to save money, it could actually be costing your business money. An accountant will have greater costs than managing your accounts by yourself, but will also save you money.

 Forgetting to record small transactions

How does your business manage its small transactions? It’s very easy to think of petty cash transactions as unimportant, but it’s essential that your business has a record of all of its spending, no matter how insignificant.

This is especially important in retail environments, where many transactions are cash based. It’s also important to record small transactions like paying for a postal delivery, even if the cost is insignificant.

Stay on top of the small transactions and it becomes far easier to manage the bigger ones. By keeping a record of small transactions, you’ll be able to easily manage your books as your company grows in size and its number of transactions increases.

Working Without a Budget

Create a budget so that you have a baseline to judge your business’s operating results. Budgets are not only useful in curbing overspending but can be used to establish realistic, written financial objectives. Budgets should always be grounded in reality, but you can certainly use your budget to set reasonable financial goals, whether it be increasing revenues or reducing operating expenses.

Accounting Tips for the Fall


Accounting for Petty Cash

Petty cash accounts are convenient when a business makes regular small purchases or needs cash available to reimburse the business expenses of staff. But petty cash still needs fully accounting for in business records.

You’ll need to have a policy which states what items can be charged to petty cash, then set up a separate section in your accounting system which records the movement of cash. Keep all receipts for petty cash within that system. 

  • Have a petty cash book and balance it regularly to make sure all transactions are accounted for.
  • Whoever authorises petty cash should not be the person in receipt of the money.
  • Decide how much petty cash you’ll hold, and then top up from the main bank account when necessary to maintain this amount.

Review Your Accounts Regularly

When someone else handles your finances, you as the business owner come to trust that individual implicitly. That said, this does not mean that you should stay in the dark about any aspect of your business. To understand the operational status of your business, it’s important to review your books regularly. This will give you a clearer picture on how your business functions, where it can improve and where resources need to be allocated. While it is a good practice to review accounts at regular intervals, you should also review your accounts at unscheduled times to ensure that your books are properly maintained at all times.

Track your expenses

The foundation of solid business record keeping is learning to track your expenses effectively. It’s a crucial step that allows you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and support what you report on your tax return. Right from the beginning, you should establish a system for organizing receipts and other important records.

Establish sales tax procedures

The world of ecommerce has shaken up sales tax regulations and they are admittedly a bit confusing due to location issues. When a customer walks into a brick and mortar retail shop, they pay the sales tax of whatever state or province they make the purchase in, no matter if they live in that city, or they’re visiting from across the world. However, when you sell online, you’re often selling to customers who live in different states/provinces, and even countries.

Accounting Tips to Wrap up the Summer


1. Keep Accurate Records

Consider investing in an easy accounting software, such as a simple solution, where you can track money in and out daily. Everything you track will only help your accountant later on down the road — which is good news for you and your bottom line!

2. Never Combine Personal and Business Finances

This is one of the most important bookkeeping tips you need to keep in mind. Even if you’re the sole employee in your small business, mixing personal and business-specific transactions can make it much harder to organize and track your records. You must treat your business as a viable entity. This means maintaining separate checking accounts, open a business credit card, and consider establishing an LLC for your small business. In the event of an audit, this tip will keep you out of hot water with the IRS.

3. Don't Allow Clients to get Away with not Paying Balances

Seeing a large amount in the receivables column is a good thing, but the money doesn’t really count until it is in your bank account. Don’t let clients avoid regular payments. Stand firm and insist you receive payment for past orders before letting them have more materials or services. The receivables department is crucial in keeping your company afloat.

4. Keep a Cash Reserve

In business and in life you should always have a contingency plan. It’s common for small business owners to dump excess cash back into their business to scale. This is a good practice only if you’re putting a small portion into cash reserves. Most financial analysts suggest having at least three months of runway (basic operating expenses) on hand at all times. However, I suggest having at least six months of runway since things never go exactly as planned. You should check your reserves quarterly and make sure your reserves can keep you afloat for six more months. If not, it’s time to start putting a bit more away.


4 Ways to Use Your Tax Refund Wisely - Part 2

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3. Donate to Charitable Causes. If you're on a tight budget, making charitable donations can be on the lower end of your list of priorities. Your refund gives you a chance to give a little back.

4. Make Home Improvements. Take a look around the house. Do you need a new roof? Is your kitchen outdated? Could new energy-efficient appliances lower your utility bills? Home improvement projects can immediately increase the value of your property.

4 Ways to Use Your Tax Refund Wisely - Part 1

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1. Start or Increase Your Emergency Fund. Just one surprise major expense can send you on a debt spiral toward financial trouble. Your fund should contain about three to six months worth of savings. Using your refund can make a significant deposit to your emergency fund.

2. Pay Off High-Interest Debt. The next best thing after establishing an emergency fund that you can do with your tax refund is to reduce or eliminate any high-interest debt. Start paying down your debt whether it be payday loans, title loans, debt consolidation loans, high-interest private student loans, car loans, or credit card debt.


Tax Season is Here!


Tax season is here! Here are some tips to prepare your tax information for this tax season.

1. Evaluate Your 2017 Returns. Reviews of your previous tax return. Remember important details and changes they may have occurred during the past year, especially marital status, child adoption cases and work location. Any changes on this information can change your tax return.

2. Organize Your Files. It’s important to organize the necessary documents that you have, especially the ones you’ll be receiving such as:

  •          Form 1099-MISC
  •          W-2 earning statements
  •          Form 1095-A
  •          W-2Gs Form
  •          1098 Forms
  •          Schedule K-1 Form

Also check your inventory products to be sold before the year ends, you want to monitor costs in factors such as labor, raw materials, etc. You should also organize your receipts, which are important especially when it comes to standardized deductions.

Review your books for any unreconciled transactions, so that they can be easily explained to your tax preparer.

3. Hire A Tax Preparer. If you think that there’s a problem with your books, or you’re having difficulties in preparing the documents that you need, then it is highly recommended that you hire someone who can help you fix any kinds of tax dilemmas.

4. Justify Your Expenses. If ever you’re running a startup business, it’s best recommended that if you want to claim items as business expenses, then you need to justify this with the IRS.

5. Stay Updated with Tax Laws and Deadlines. Stay updated with the latest tax news, especially changes in tax laws that may or may soon affect your tax return. These involve factors such as state tax regulations, eligibility as well as limits in contribution.


6 Things to Get Organized Before Meeting with Your Accountant Part 3

Tax season is upon us, now is the time to get prepared and organized. Getting your taxes done is already stressful enough, being organized can ease some of the stress for you and your accountant. Make sure to bring these things to your accountant when preparing your taxes.

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5. Real Estate Documents. Bring your accountant documents relating to a recent home purchase, proof of paid mortgage or home equity loan interest, or proof of paid real estate and personal property taxes paid. Real estate holding can yield many different deductions, so make sure to bring these to your accountant.

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6. Proof of Expenses. Keep a folder especially for receipts, invoices, medical bills, charitable contributions, IRA contributions, job-hunting expenses, mileage logs, education expenses, self-employment expenses, and any other papers that prove expenses paid. If you start a folder at the beginning of the year then you won’t be scrambling at the end of the year to get all of these papers together. These papers are a must if you want to get your deductions and credits.

6 Things to Get Organized Before Meeting with Your Accountant Part 2

Tax season is upon us, now is the time to get prepared and organized. Getting your taxes done is already stressful enough, being organized can ease some of the stress for you and your accountant. Make sure to bring these things to your accountant when preparing your taxes.


3. Wage Statements. Company employees will receive a W-2 wage and tax statement from their company. If you do not receive your W-2 form from your employer, make sure to call and figure out why you didn’t receive it. Independent contractors and freelancers will receive a Form 1099-MISC from each client they worked that year. Bring all forms to your accountant.

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4. Additional Income Statements. These statements include interest and dividend income from investments, unemployment income, or social security income. If you receive these statements, make sure to add them to the other forms you are taking to your accountant.

6 Things to Get Organized Before Meeting with Your Accountant Part 1

Tax season is upon us, now is the time to get prepared and organized. Getting your taxes done is already stressful enough, being organized can ease some of the stress for you and your accountant. Make sure to bring these things to your accountant when preparing your taxes.


1. Identification Information. Identification information is needed for you and all of your dependents. Make sure to bring social security cards for everyone that is being claimed on the tax return. Social security numbers, names and dates of birth are all needed for tax returns. Also, bring a second form of id such as a driver’s license, military ID, or any state-issued picture ID card.

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2. Copy of Last Year’s Tax Return. This helps your accountant access information and calculate certain deductions easily.  Your accountant could find possible discrepancies and guide you in the right direction to get them cleared up.

3 Big Mistakes To Avoid For SMALL Business

The top 3 Small Business Accounting Mistakes Are:

1.) Failure To Reconcile Bank Accounts On a Regular Basis

2.) Failure to Apply Payments to Open Receivables 

3.) Failure to Back Up Data

Skipping routine accounting tasks sounds like it would save time, but in fact, they can actually end up costing you time later when errors force you to stop everything and unsnarl all the nightmare accounting tangles that you have piled up. 

Call us to help keep your books error free!

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Predictions for 2017: Unemployment, Auto and Home Sales


  • Unemployment Won’t Go Far, Finishing Around 5%

At 4.6% as of November 2016, the unemployment rate was far below the historical average of 5.8%, according to Bureau of Labor Statistics data since 1948. In fact, unemployment was at the lowest point since 2007, indicating there is little room for further improvement.

“It is unlikely to fall much further,” said Bruce E. Hansen, distinguished chair of economics at the University of Wisconsin-Madison. “It may either stay roughly constant, as it has recently, or increase slightly.”

With that in mind, we expect the unemployment rate to settle around 5% during 2017.

  • U.S. Auto Sales Will Surpass 17M For The Third Straight Year

Total light-vehicle sales have risen consistently since September 2009, reaching a record high of 17.4 million units in 2015 that we might narrowly surpass this year. And 2017 is shaping up to provide more of the same, with expectations for another 17+ million units sold and the potential for a new annual record, depending on how well consumers manage rising debt levels and increased interest rates.

“Auto sales will remain robust,” said Scott E. Hein, chair of the Texas Tech School of Banking and co-editor of the Journal of Financial Research. “But growth will not accelerate since this has been the one area that has done well in the weak economic growth environment experienced over the last half dozen year.”

With such headwinds in mind, however, it is unlikely that the U.S. auto industry’s boom can continue much beyond 2017. So we can expect sales volume to begin regression toward the historical mean of just over 15 million vehicles sold per year.

  • Existing Home Sales Will Rise To 6M, Despite Higher Rates
  • We expect existing home sales to reach 6 million in 2017, increasing by roughly 200,000 units from the 5.8 million forecast for year-end 2016 by the National Association of Realtors. Interestingly enough, higher rates might actually be the reason for the growth.

“If interest rates rise slowly, we may see a nice bump in home sales and mortgage availability as buyers see low interest rates slowly fading and banks have higher rates to buffer against risk,” said Dr. Robert Eyler, director of the Center for Regional Economic Analysis at Sonoma State University.


6 Weekly Steps to Manage your Business Finances

Managing your business finances does not have to be eat-your-spinach drudgery. The key, of course, is to create a realistic plan with a budget, record your transactions correctly, review your results regularly and always keep good records. The following weekly check-list will help you stay on track and understand exactly where your business is excelling and where it needs improvement.

Weekly Accounting Tasks

1. Record Transactions

Record each transaction (billing customers, receiving cash from customers, paying vendors, etc.) in the proper account daily or weekly, depending on volume. Although recording transactions manually or in Excel sheets is acceptable, it is probably easier to use accounting software like QuickBooks. The benefits and control far outweigh the cost.

2. Document and File Receipts

Keep copies of all invoices sent, all cash receipts (cash, check and credit card deposits) and all cash payments (cash, check, credit card statements, etc.).

Start a vendors file, sorted alphabetically, (Staples under “S”, Costco under “C,”etc.) for easy access. Create a payroll file sorted by payroll date and a bank statement file sorted by month. A common habit is to toss all paper receipts into a box and try to decipher them at tax time, but unless you have a small volume of transactions, it’s better to have separate files for assorted receipts kept organized as they come in. Many accounting software systems let you scan paper receipts and avoid physical files altogether.

3. Review Unpaid Bills From Vendors

Every business should have an “unpaid vendors” folder. Keep a record of each of your vendors that includes billing dates, amounts due and payment due date. If vendors offer discounts for early payment, you may want to take advantage of that if you have the cash available.

4. Pay Vendors, Sign Checks

Track your accounts payable and have funds earmarked to pay your suppliers on time to avoid any late fees and maintain favorable relationships with them. If you are able to extend payment dates to net 60 or net 90, all the better. Whether you make payments online or drop a check in the mail, keep copies of invoices sent and received using our accounting software.

5. Prepare and Send Invoices

Be sure to include payment terms. Most invoices are due within 30 days, noted as “Net 30” at the bottom of your invoice. Without a due date, you will have more trouble forecasting revenue for the month. To make sure you get paid on time, always use an invoice template the contains the right details such as payment terms, itemized charges, and your payment address.

For a complete guide to creating invoices, managing vendors and ensuring you get paid on time, check out our Ins and Outs of Invoices.

6. Review Projected Cash Flow

Managing your cash flow is critical, especially in the first year of your business. Forecasting how much cash you will need in the coming weeks/months will help you reserve enough money to pay bills, including your employees and suppliers. Plus, you can make more informed business decisions about how to spend it.

All you need is a simple statement showing your current cash position, expected cash receipts during the next week/month and expected cash payments during the next week/month. To download a free customizable cash flow statement template, click here.

Information gathered from:

We would love to help manage your small business finances for you!  Give us a call!

AMJ Bookkeeping  


Mid-Year Review: What to Look For

As we reach June and July, this is the perfect time to take a look at your financial footing and assess where you are exceeding and where you can improve. How are you tracking against those goals set in early January? Is there an opportunity to save more money, contribute to a cause, and/or minimize your tax obligation? 

Surprisingly, this mid-year financial check-up is often overlooked. Yet, reviewing the past six months’ worth of activity can do wonders for achieving your financial goals by year-end.

If unsure what to look for, start by examining the financial goals set earlier in the year, and focusing on each major aspect of your financial plan. Below are a few tips to help streamline the process and ensure all bases are covered:

Review To-date 401(k) Contributions. Take a look at your to-date numbers to ensure you are on track to maximize your yearly contributions. In addition to helping increase your account balance, maxing out those contributions can also reduce your taxable income. Win/Win.

Boost Your Savings. With less than six months to go, it’s a good idea to review your current savings and consider boosting your recurring contribution, even if it’s a small amount. And, while summer can be a drain on your finances—trips, kids out of school, additional entertainment—challenge yourself to spend less and save more. It could be as simple as one less cup of coffee per day, or opting for a home-cooked meal instead of an expensive dinner out.

Cut More Fees. You may have examined all of the pesky credit card and bank fees earlier in the year. Note that banks are often changing their rules and you might be surprised to learn you are now paying a fee for something you previously received for free. And every fee you pay means less money in your pocket. See how many fees you can reduce or remove before the end of the year. Consider re-investing the dollars saved into a savings or retirement account to really maximize those returns.

Taxes Already? Yes, we aren’t quite ready to talk about taxes yet. But just because we’re not talking about them, doesn’t mean you shouldn’t be putting yourself in the best position for when the time comes. If you aren’t already doing so, get in touch with your CPA and discuss your tax estimate. There’s still plenty of time left in the year to mitigate tax consequences, enabling you to have a healthier bottom line.

Information gathered from:

AMJ Bookkeeping  


Tips to Reduce Your Debt

As we are coming out of tax season and you are receiving those tax refunds, the time is now to start thinking about reducing your debt.  Below are 33 tips from blog, "Becoming Minimalist".  The writer put together these tips after going through a financial program called Dave Ramsey's Financial Peace University and paying off $66,000.00 in personal debt.


33 Proven Ideas to Get Your Debt Under Control:

  1. Re-shop auto, home and life insurance to see if you can bring down your payments.
  2. Downgrade your cable package, or get rid of it entirely.
  3. Disconnect your home phone if you have adequate cell service at your home. Or downgrade to a cheaper package.
  4. Buy and sell clothes at your local consignment or shop at Goodwill.
  5. Have a massive garage sale. (If you’d rather be out of debt than have an item, choose to sell it to help you get you there.)
  6. Advertise higher quality items on Craigslist, Facebook, or your local newspaper to get better prices.
  7. Focus on buying mostly sale items at grocery store or generic brands to reduce your cost.
  8. Use a grocery store awards program to earn money off gas.
  9. Cancel unnecessary expenses like magazine subscriptions, newspapers, manicures, pedicures etc. Anything that could be considered a “want” instead of a “need” should go until you are out of debt or greatly decrease your debt.
  10. Go to the matinee movies instead of paying full price (and skip the concessions).
  11. Or better yet, use the Red Box for at-home movie entertainment.
  12. Get temporary work or seasonal part time work to boost your income.
  13. Read books from the library.
  14. Buy your most expensive groceries in bulk at Coscto: meats, breads, cheese, produce, paper products. Establish a monthly grocery budget for the additional needs at regular grocery stores.
  15. When eating out, skip the soft drinks and stick with water. Skip the extras too (dessert, etc.).
  16. When eating out, share a large entrée or have small appetizers instead of the costly meal.
  17. Plan your errands more efficiently to conserve gas.
  18. Find friends that you can trade services with…haircutting, handyman, photography, babysitting, pet-sitting.
  19. Give home-made gifts, baked goods, or service IOU’s rather than expensive presents.
  20. Boxed cereals are expensive; switch to oatmeal, eggs or fruit for more nutritional and financial bang.
  21. Call the utility companies and get on a budget plan to give you more consistency with expenses each month.
  22. Set a spending limit with family at Christmas and/or draw names.
  23. Use exercise videos, walking or hiking instead of paying for the gym.
  24. If your haircut is too expensive, find a less expensive stylist or see if your hairdresser will cut you a break on price temporarily—ours did.
  25. Say “no” to hosting and/or attending in-home parties where you feel pressure to purchase.
  26. Does your family live nearby? Once a week dinners with mom or dad saved us a meal out of our shopping budget. Additionally, it usually led to leftovers and our parents looked forward to our visit each week.
  27. Make your coffee at home instead of buying it each day.
  28. Pack your lunch—not once a week, but regularly.
  29. Make extra dinner servings on purpose to have leftovers for lunch.
  30. Our dentist advised us we could skip the fluoride treatments if we were using a daily dental rinse—which we did… and bought on sale.
  31. Program your thermostat for savings on heating/cooling when you’re not at home.
  32. Tempted by certain retail stores? While digging out of debt, avoid window shopping these places where you’ve failed to control your impulses before.
  33. Give**.

****Many wonder about Number 33 (Give) because it seem counter intuitive to most of us. One thing we never stopped doing – even in the worst of times—was giving. We always gave money to our church, our favorite charities, and foundations that we believe in. 

Read more: 

While these tips are simple, put into practice they will radically help you cut lifestyle expenses.  As you shift where your money is going, you will be able to actively reduce your debt over time!

AMJ Bookkeeping