Q&A
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Frequently asked questions
Why is it important to correctly identify transactions with vendors?
Accurate identification of transactions with vendors enables the business to track and pinpoint vendors that will require a 1099 in the subsequent year.
How can I maintain an accurate record of my income and expenses?
It is recommended to employ an accounting software to keep a precise record of income and expenses, where all transactions related to the company’s operations can be logged.
Why are accounting books essential for a company?
Accounting books provide insight into the financial reality of the company, revealing whether the company is generating profit or operating at a loss, and providing the exact operating costs. Additionally, accounting books facilitate tax obligations compliance.
How should I register a fixed asset?
An asset is classified as a fixed asset when it is an item that your company will not consume, sell, or convert into cash in the upcoming fiscal year. Fixed assets differ from current assets, which are either in cash or slated to be converted to cash within the next 12 months. Since a fixed asset is used over several years, it needs to be recorded in the balance sheet and depreciated over time as its value decreases.
What is accounting and financial management?
It is the process of obtaining information on the company’s financial operations. This information, to be useful, must be consistent, orderly, and methodical, and should be prepared by experienced accounting professionals.
Why is it important to record the depreciation of an asset?
Recording the depreciation of an asset is crucial to maintain the value of the asset in the books and to make informed decisions regarding the management of the asset.
Who needs to file a 1099 and why?
Partnerships, small businesses, or corporations are required to file 1099 reports on or before January 31st, to the IRS and to contractors or single member vendors to whom they paid $600 or more during the previous calendar year.
What are the key financial statements to review each month?
Business owners should regularly review the Profit & Loss (P&L) and Balance Sheet reports to understand the company’s performance. The Balance Sheet provides a snapshot of the company’s assets and liabilities, while the P&L report details the company’s income and expenses for a specific period, and indicates whether the company has generated any profit.
What is the purpose of the Shareholder account?
The Shareholder account is used to record additional resources lent by the owner to the company, which are expected to be returned to the owner at a later date. This account is recorded as a long-term liability.
What does banking in QuickBooks entail?
Banking in QuickBooks is a feature that allows the direct connection of bank accounts to the accounting books. This enables all transactions to be reflected in real time, making accounting faster and more accurate. The connection needs to be established in QuickBooks by the owner of the bank account.
