- November 7th, 2012
- John Dillard
- Financial Statements & Bookkeeping, Income Tax Preparation of Corporate & Personal Income Taxes
Critiquing the S Corporation Books of a Business Owner
Many business owners struggle with the preparation of their own internal financial statements. It is widely believed that if a CPA can help a client keep their own internal books current and correct that a business owner will help mitigate CPA fees as well as having more reliable internal data, from which to run their business. Having served as a CPA and a Believer/Christian for decades it is essential to help clients to the best of the customer’s advantage and having reliable internal books is the best first step in that direction. Below is a sample of the critiques a business owner might receive to help guide in the preparation of their own internal bookkeeping:
Below Please Find Critiques to your Internal Books as of year-end.
-Do you have Bank Reconciliations for all of the cash/checking/saving accounts.
-Please be sure your Accounts Receivable Aging Equals the Balance Sheet.
-Please be sure your Accounts Payable Aging Equals the Balance Sheet.
-Please be sure your Accrued Expenses and Accrued Payroll Taxes, are correct.
-Please be sure that your Customer Deposits account is correct and current.
-Please be sure that you have in your Accrued Workers Compensation Insurance Account is correct all open and due monies are correctly recorded.
-Please be sure that all of your Prepaid balances are accurate and correctly reflect the amount of monies that you have paid in advance and have not yet used/accrued.
-Please be sure you have take out of A/R any amounts you deem uncollectible, while being sure to change the write off to the Allowance for Doubtful Accounts.
-At present you have enough Depreciation Expense to cover a prorated amount as this is an interim statement. Please reduce this amount accordingly. To understand depreciation expense and its application and use for your business http://www.hiscpa.com/depreciation-expense.html
-If the distributions on the books are monies paid to all shareholders based upon their ownership percentage, then leave the number as is. However, if these monies are to primary owner only please re-class these monies to the Due to Shareholder account.
-Please be sure the gross wages on the Profit and Loss equals your year to date payroll reports. For help on how to prepare your company’s financial statements see http://www.hiscpa.com/financial-statements.html
-Your retained earnings account should be adjusted to the amount per last year’s Balance Sheet balance. Please review, correct and re-send the corrected data.
-Please be sure that your Accounts Receivable over 120 days in your ageing and an anticipated amount of uncollectable monies in your A/R balance are less than your Bad Debt Reserve account. To help understand how to prepare and manage your company’s financial statement visit http://www.hiscpa.com/profit-loss-statements.html
-What is the Negative Balance in Cash/Checking account as this would suggest you have written checks over your checkbook balance.
- I would suggest to re-title your checking accounts to reflect the name of the bank and type of account.
-Your Accounts Payable Balance reflects a negative balance, which would indicate an error or overpayment to an vendor. Please review and correct.
-Please be sure your Accrued Credit Cards are correct and reflect the open and due business monies incurred to the business account.
-You have $4000 in the Line of Credit account on the Profit and Loss. If this is interest expense, please re-class. If it is a principal payment, please code it to the liability account accordingly on the Balance Sheet.
-Your retained earnings account should be adjusted on your internal books in 2008 to the amount per last year’s Balance Sheet balance. Care should be exercised to ensure that no other Balance Sheet accounts are inadvertently adjusted from their “closed” year end balances that agree to the filed tax returns.
-Please break out into the appropriate business expense categories that at present you have added to the Operating Expense category, as tax law requires appropriate business categories to be used.
If you need help in reclassifying these monies, please do not hesitate to call. For tips to monitor your monthly books visit http://www.hiscpa.com/monthend.html
ASAP after you make these changes please re-send so that I might re-review.
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