O'Reilly logo

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Introductory Accounting

Book Description

Accurate accounting is the key to a successful business. But when you're dealing with assets and liabilities, profit and loss, and debits and credits, juggling all the numbers can quickly get confusing. Idiot's Guides: Introductory Accounting gives you everything you need to know about basic financial accounting to manage your dollars and cents and keep your accounts in order. Ideal for small businesses, as well as any large company bookkeeper, this book covers:

*Structuring your business and choosing an accounting method
*Setting up an accounting system and basic operating procedures (tracking sales, determining costs, managing cash, etc.)
*Creating employee records, maintaining a payroll system, and accounting for benefits
* Keeping tax and benefit records
* Reporting costs
* Closing out cash journals and employee accounts at month end and balancing ledgers
*Preparing month-end and year-end statements and reports
*Producing a balance sheet and monthly profit-and-loss (P&L) statements
*Using accounting software

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright Page
  4. Introduction
  5. Part 1: Laying the Groundwork
    1. 1 How Accounting Works
      1. Accounting Simplified
      2. Accounting Terminology and Concepts
        1. Books and Accounts
        2. Debits and Credits
        3. Assets and Liabilities
      3. T Accounts
        1. How T Accounts Work
        2. Using T Accounts
        3. Recording Your Transaction
        4. Typical Accounting Transactions
        5. Checks
        6. Invoices
        7. Sales Receipts
        8. Credit Card Transactions
        9. Recording Estimates and Sales Orders
    2. 2 Selecting Your Business Structure
      1. Organizing Your Business
        1. Sole Proprietorships
        2. Partnerships
        3. S Corporations
        4. Limited Liability Companies
        5. C Corporations
        6. Tax-Exempt (Nonprofits)
      2. Your First Capital Infusion
      3. Separating Business from Personal
      4. Choosing an Accounting Method
      5. Deciding on a Tax Year End
      6. Zoning/Business License
      7. Your Tax ID Number
      8. Your Business Plan
  6. Part 2: Doing the Books
    1. 3 Choosing Accounting Software
      1. The Importance of Accounting Software
      2. Desktop Versus Cloud-Based Software
      3. Common Desktop Accounting Packages
        1. Quicken
        2. QuickBooks Pro
        3. QuickBooks Premier
        4. QuickBooks Enterprise
        5. Sage 50
        6. Mid-Range to Enterprise Accounting Software
      4. Common Cloud Accounting Programs
        1. QuickBooks Online
        2. Xero
        3. FreshBooks
      5. Point-of-Sale Software
        1. QuickBooks Point of Sale
        2. Revel Systems POS
      6. Changing Software
      7. Getting Help with Your Accounting Software
    2. 4 Managing Your Accounts
      1. Account Categories
        1. Assets
        2. Liabilities
        3. Equity
        4. Revenue
        5. Cost of Goods Sold
        6. Expenses
        7. Other Accounts
      2. Managing a Chart of Accounts
      3. Making Everything Balance
        1. Trial Balance
        2. General Ledger
    3. 5 Accounting for Inventory
      1. The Importance of Tracking and Valuing Inventory
      2. Inventory Item Types and Setup
        1. Stock Items
        2. Nonstock Items
        3. Assemblies
        4. Service Items
        5. Special-Use Items
      3. Physical Inventory Valuation Methods
        1. Average Cost
        2. First in, First Out
        3. Last in, First Out
        4. Specific Identification
      4. Keeping Count
        1. Reordering
        2. Taxes, Accounting, and Inventory
        3. Physical Inventory Count
        4. Inventory Adjustments
      5. Reporting
        1. Inventory Valuation Report
        2. Sales by Item
        3. Items Sold to Customers
        4. Physical Inventory List Report
    4. 6 Doing Business Day to Day
      1. Recording Sales
        1. Customer Records
        2. Sales Receipts
        3. Invoices
      2. Receiving Payment
        1. Making Bank Deposits
        2. Sales Orders
        3. Customer Retainers and Deposits
        4. Other Invoicing-Related Transactions
      3. Paying Bills
        1. Credit Card Purchases
        2. Purchasing Inventory
        3. Purchase Orders
      4. Processing Payroll
      5. Voiding Checks
    5. 7 Tackling the General Ledger
      1. The Importance of the General Ledger
        1. Updating Transactions Directly
        2. Adjusting Journal Entries
        3. Prior Year Adjustments
      2. Finding Misplaced Transactions
      3. Noncash Transactions
      4. Nonposting Transactions
      5. When Not to Use Journal Entries
    6. 8 Reconciling Bank and Credit Card Statements
      1. I’s Not Just for Month-End
      2. Preparing and Reconciling
        1. Why Reconcile?
        2. Reconciling at a Glance
        3. Starting a Reconciliation
        4. Clearing Transactions
        5. Making Corrections
        6. Tips for Successful Reconciliations
      3. Automated Reconciliations
      4. Reconciling Credit Card Statements
      5. Identifying Transpositions
      6. When You Can’t Reconcile
  7. Part 3: Employee-Related Accounting
    1. 9 Setting Up New Team Members
      1. Are You an Employee?
      2. The Difference Between Employees and Independent Contractors
      3. New Hire Paperwork
        1. Federal Paperwork
        2. State Paperwork
        3. Local Paperwork
      4. Rules for Hourly and Salaried Employees
        1. Hourly Workers
        2. Salaried Workers
      5. Paying Owners
      6. Payroll Processing Options
        1. Third-Party Providers
        2. Accounting Software Options
        3. Manual Calculations
    2. 10 Understanding Insurance
      1. Liability Insurance
        1. Workers’ Compensation
        2. General Liability Insurance
        3. Product Liability Insurance
        4. Directors’ and Officers’ Liability Insurance
        5. Professional Liability Insurance
        6. Automobile Insurance
        7. Cyber Risk Insurance
        8. Personal Umbrella Insurance
      2. Property Insurance
        1. Boiler and Machinery Insurance
        2. Business Interruption Insurance
        3. Inland Marine Insurance
      3. Health Insurance
      4. Life Insurance
      5. Tax Advantages
        1. Health Insurance for the Self-Employed
        2. Health Insurance Paid by Individuals
      6. Recording Insurance Costs and Reimbursements
    3. 11 Other Benefits and Reimbursements
      1. Retirement Plans
        1. SIMPLE IRAs
        2. Simple Employee Pensions (SEPs)
        3. 401(k) Plans
        4. Keogh Plans
        5. Remitting Retirement Contributions
        6. Government Oversight
      2. Vehicle Reimbursements
      3. Other Reimbursements
      4. Cafeteria Plans
      5. Paid Vacation and Sick Leave
        1. Paid Vacation
        2. Sick Leave
        3. Family and Medical Leave Act
    4. 12 Payroll Taxes
      1. Withholding Taxes
        1. Federal Withholding
        2. State Withholding
        3. Local Withholding
      2. Social Security and Medicare
        1. Social Security Withholding
        2. Medicare Withholding
      3. Unemployment Taxes
        1. Federal Unemployment Taxes
        2. State Unemployment Taxes
      4. Temporary Disability Insurance
  8. Part 4: Financial Reporting
    1. 13 Tracking Receivables and Payables
      1. Payment Terms
      2. Aged Accounts Receivable Report
      3. Customer Statements
      4. Collectability Risk
      5. Finance Charges
        1. Refunding Credit Balances
        2. Writing Off Bad Debts
        3. Managing Credit Risk
      6. Aged Accounts Payable Report
      7. Eliminating Zero Balances on Aging Reports
    2. 14 The Big Three Financial Statements
      1. The Profit and Loss, or Income, Statement
      2. The Balance Sheet
        1. Current Assets
        2. Long-Term Assets
        3. Current Liabilities
        4. Long-Term Liabilities
        5. Equity
      3. The Statement of Cash Flows
        1. Cash Flow from Operations
        2. Cash Flow from Investing Activities
        3. Cash Flow from Financing Activities
      4. Reviewing Your Financial Statements
        1. Reviewing Your Income Statement
        2. Reviewing Your Balance Sheet
      5. When You Find an Error
    3. 15 Internal Control and Minimizing Fraud Risk
      1. Securing Your Accounting Records
      2. Updating Your Accounting Software
      3. Backing Up Your Accounting Records
        1. Backing Up and Restoring Desktop-Based Data
        2. Backing Up Cloud-Based Data
      4. Managing Identity Theft Risk
      5. Securing Customer Information
      6. Using Magnetic Swipe Card Readers
      7. Securing Checks
      8. Destroying Records
      9. Disaster Recovery
    4. 16 Financial Reports and Stakeholders
      1. How the IRS Reviews Your Financials
      2. What Lenders Are Looking For
        1. Consistency
        2. Collateral
        3. Cash Flow
        4. Minimal Revenue Concentrations
        5. Financial Ratios
        6. Depreciated Assets
        7. Discretionary and Owner Expenses
      3. Using Financial Ratios
        1. Current Ratio
        2. Quick Ratio
        3. Debt-to-Equity Ratio
        4. Cash Flow Coverage Ratio
        5. Performance and Probability Ratios
        6. Accounts Receivable Turnover Ratio
        7. Accounts Payable Turnover Ratio
        8. Inventory Turnover Ratio
  9. Part 5: Monthly, Quarterly, and Annual Activities
    1. 17 Closing Your Books and Other Accounts
      1. Monthly Accounting Procedures
        1. Program-Specific Tasks
        2. Bank and Credit Card Reconciliation
        3. Balance Sheet Review
        4. Income Statement Review
        5. Inventory Analysis
        6. Aging Reports Review
        7. Payroll Liabilities
      2. Understanding the Trial Balance
        1. Adjusted Trial Balance
        2. Accounts with Opposite Signs
        3. Amortizing Prepaid Expenses
      3. Checking and Correcting Balances
        1. Lingering Balances
        2. Duplicate and Mistaken Transactions
        3. Double-Checking Your Work
      4. Year-End Procedures
    2. 18 Remitting and Reporting Taxes
      1. Remitting Payroll Taxes
        1. Federal Payroll Taxes
        2. Federal Unemployment Taxes
        3. State Withholding Taxes
        4. State Unemployment Taxes
        5. Local Withholding Taxes
      2. Reporting Payroll Taxes
        1. Federal Payroll Taxes
        2. State Withholding Taxes
        3. State Unemployment Taxes
      3. Sales Tax
      4. Other Taxes
        1. Annual State Registration Fee
        2. Business License Tax
        3. Ad Valorem Taxes
        4. Excise Taxes
        5. Tourist Taxes
    3. 19 Filing Business and Personal Tax Returns
      1. Business Income Tax Returns
        1. Sole Proprietorship
        2. Partnerships
        3. S Corporations
        4. C Corporations
        5. Limited Liability Companies
        6. Due Dates
        7. Tax Return Extensions
        8. Estimated Tax Payments
      2. Business State Income Tax Returns
      3. Supporting Tax Forms
        1. Form W-2
        2. Schedule K-1
        3. Form 1099
      4. Personal Income Tax Returns
        1. Federal Income Tax Return
        2. State Income Tax Return
      5. Getting Help Versus Filing on Your Own
        1. Hiring a Professional
        2. Filing on Your Own
        3. Tax Return Tips
    4. 20 Recordkeeping Rule Book
      1. Maintaining Your Accounting Records
      2. Keeping Employee Records
        1. Federal Requirements
        2. State Requirements
        3. Local Requirements
        4. Other Stakeholders
      3. Dealing with Other Records
        1. Records to Keep Permanently
        2. Records to Hold Temporarily
      4. On-Demand Records
  10. Part 6: Data Analysis and Forecasting
    1. 21 Working with Spreadsheets
      1. Spreadsheet Options
      2. Introduction to Spreadsheets
        1. Spreadsheet Basics
        2. Making Basic Cell Entries
        3. Entering Formulas and Filling Entries
        4. Inserting a Function
        5. Finishing the Amortization Table Formulas
        6. Freezing Rows On-Screen
        7. Printing
    2. 22 More Spreadsheet Tools and Techniques
      1. Spreadsheet Templates
        1. Accessing Templates
        2. Types of Templates
      2. Developing the Foundation of a Budget
        1. Exporting from Xero
        2. Exporting from QuickBooks Desktop
        3. Building Your Budget
      3. Maintaining a Shadow Accounting System
        1. Forecasting Inflows
        2. Forecasting Outflows
      4. Analyzing Accounting Data
        1. Filtering Data
        2. Quick Analysis
        3. Recommended Charts
        4. Recommended PivotTables
      5. Maintaining Supporting Schedules
  11. Appendixes
    1. A Glossary
    2. B Key Business Forms