The Complete Idiot's Guide to Accounting

349 Pages·2006·10.96 MB·English

by  MBA

Accounting
Second Edition
by Lita Epstein, MBA, and Shellie Moore, CPA
A member of Penguin Group (USA) Inc.

Accounting
Second Edition
by Lita Epstein, MBA, and Shellie Moore, CPA
A member of Penguin Group (USA) Inc.
ALPHA BOOKS
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Copyright © 2006 by Lita Epstein and Shellie Moore
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THE COMPLETE IDIOT’S GUIDE TO and Design are registered trademarks of Penguin Group (USA) Inc.
ISBN: 1-4406-1476-8
Library of Congress Catalog Card Number: 2006920728
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Note:This publication contains the opinions and ideas of its authors. It is intended to provide helpful and informative
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Publisher: Marie Butler-Knight Cartoonist: Shannon Wheeler
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Managing Editor: Billy Fields Indexer: Angela Bess
Development Editor: Ginny Bess Munroe Layout: Ayanna Lacey
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Copy Editor: Cari Luna
Contents at a Glance
Part 1: Charting the Books 1
1 Structuring Your Business 3
Look at the various ways you can set up your business.
2 Mapping Your Accounts 13
Introduction to the general ledger and balance sheet accounts.
3 Getting the Number News 23
Review the Profit and Loss Statement accounts.
4 Developing the General Ledger 33
Talk about how to set up the general ledger and post to it.
5 Changing the General Ledger 45
Explore ways to adjust the general ledger, as well as how to
add new accounts.
Part 2: Doing Business 55
6 Getting Organized 57
Discuss how to set up accounting operating procedures.
7 Tracking Sales 67
Review how to track your sales.
8 Determining Costs 79
Learn how to determine and track your inventory costs.
9 Adjusting Sales 89
Not all sales or purchases are final; review how to adjust
the records.
10 Cashing Out 99
Explore cash management techniques.
11 Keeping Records and Paying Taxes 111
Discuss what records you must keep and how long you must
keep those records.
Part 3: Keeping Employees Happy 121
12 Hiring and Paying Employees 123
Review what you need to do before and after hiring
employees.
iv The Complete Idiot’s Guide to Accounting, Second Edition
13 Taxing Times 135
Learn what your tax-reporting obligations are once you hire
employees.
14 Benefiting Employees 147
Explore benefit rules as they relate to taxes.
15 Keeping Tax and Benefit Records 159
Discuss what types of records you need to keep relating to
payroll taxes and benefits.
16 Reporting Employee Costs 169
Review the key governmental payroll reports you must file.
Part 4: Closing Out the Books 183
17 Closing Cash Journals 185
Learn how to close the cash journals.
18 Closing Employee Accounts 195
Review the process for closing the employee accounts.
19 Balancing the Ledger 201
Discuss how to balance your ledgers.
20 Testing Your Work 207
Learn how to do a trial balance and find any errors.
Part 5: Putting On a Show 215
21 Balancing Act 217
Learn how to develop a balance sheet.
22 Getting the Good and Bad News 227
Find out the key ingredients of a Profit and Loss Statement.
23 Year-End Payroll Reporting 235
Produce employee reports on time and using the right forms.
Part 6: Closing the Books at Year-End 247
24 Doing Personal and Business Tax Returns 249
Discuss how business owners file their federal tax forms.
25 Closing the Books 255
Review the process of closing the books at year-end and getting
ready for a new year.
Contents at a Glance v
26 Computerizing the Books 263
Learn how to computerize your books and find out about key
accounting software.
Appendixes
A Glossary 269
B Key Business Forms 275
C Small Business Tax and Form Calendar 305
Index 315

Contents
Part 1: Charting the Books 1
1 Structuring Your Business 3
Accounting for the Cash ................................................................4
Choosing a Method ......................................................................5
Getting Organized ........................................................................6
Sole Proprietor ............................................................................6
Partnerships ................................................................................7
Limited Liability Companies ........................................................8
Corporations ................................................................................9
Choosing Your Organization ......................................................10
Picking Your Year ........................................................................11
2 Mapping Your Accounts 13
Creating Reports ........................................................................14
Balancing the Business ................................................................15
Counting Assets ..........................................................................15
Determining Liabilities ..............................................................19
Recording Equities ......................................................................20
Your Chart of Accounts Balance Sheet ......................................21
3 Getting the Number News 23
Developing Profit and Loss Statements ....................................24
Tracking Income ..........................................................................24
Determining Sales Costs ............................................................25
Calculating Expenses ..................................................................26
Your Chart of Accounts Profit and Loss Statement ..................29
4 Developing the General Ledger 33
Working With Debits and Credits ............................................34
Creating Entries ..........................................................................35
Posting to the Ledger ..................................................................38
5 Changing the General Ledger 45
Adjusting Accounts ......................................................................46
Depreciating Assets ....................................................................46
Booking Prepaid Expenses ..........................................................50
viii The Complete Idiot’s Guide to Accounting, Second Edition
Adding Accounts ..........................................................................52
Deleting Accounts ......................................................................53
Part 2: Doing Business 55
6 Getting Organized 57
Setting Up Cash-Operating Procedures ....................................57
Designing Filing Systems ............................................................59
Implementing Controls ..............................................................60
Separating Duties Properly ........................................................62
Balancing the Costs of Duty Separation ......................................63
Bonding Your Employees ............................................................65
7 Tracking Sales 67
Taking In Cash ............................................................................68
Selling on Credit ........................................................................69
Combining Cash and Credit ......................................................72
Prepaying Accounts ....................................................................73
Controlling the Cash ..................................................................75
Monitoring Accounts Receivable ................................................76
8 Determining Costs 79
Recording Purchases ..................................................................79
Managing Inventory ....................................................................81
Tracking the Cost of Each Item ..................................................82
Practicing Inventory Costing ......................................................84
Paying Bills ..................................................................................87
9 Adjusting Sales 89
Sales Discounts ............................................................................90
Sales Returns and Allowances ....................................................91
Purchase Discounts ......................................................................93
Purchase Refunds and Allowances ..............................................94
Bad Debt ......................................................................................95
10 Cashing Out 99
Tracking General Expenses ......................................................100
Interest Payments ......................................................................102
Using Subledgers ......................................................................107
Posting to the General Ledger ................................................108