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Business Finance 101 – What does accounting equation mean?

Business Finance 101 – What does accounting equation mean?

What does accounting equation mean?

The Accounting Equation is used by small and large business, and gives a financial position of the business – ie its value (also known as equity), after debts/liabilities. The Accounting Equation or financial position is calculated from three items – assets (what it OWNS), liabilities (what is OWES) and equity (the difference between assets and liabilities, or owner’s equity).

The accounting equation is a simple way to understand how these three amounts relate to each other, and written –

Assets – Liabilities = Equity

It is also reported another way (eg USA)

Assets = Liabilities + Owner’s Equity for a small business sole proprietor

The accounting equation for a company/corporation is:

Assets = Liabilities + Stockholders’ Equity

Assets are the company’s resources —what the company owns of value – cash, accounts receivable, inventory, prepaid insurance, investments, land, buildings, equipment, and goodwill. From the accounting equation, we see that the amount of assets must equal the combined amount of liabilities plus owner’s (or stockholders’) equity.

Liabilities are the company’s obligations—what the company owes – notes or loans payable, accounts payable, salaries and wages payable, interest payable, superannuation, and income and payroll taxes payable.

Owner’s equity or stockholders’ equity is the amount left over after liabilities are deducted from assets:

Assets Liabilities = Owner’s (or Stockholders’) Equity. It also reports the amounts invested into the company by the owners plus the cumulative net profit/income of the company that has not been withdrawn or distributed to the owners.

With accurate records, the accounting equation will always be “in balance,” meaning the left side should always equal the right side. The balance is maintained because every business transaction affects at least two of the company’s accounts. As an example, if a company borrows money from a bank, the company’s assets will increase and its liabilities will increase by the same amount. When a company purchases inventory for cash, one asset will increase (inventory) and one asset will decrease (bank paid for the stock). Because there are two or more accounts affected by every transaction, the accounting system is referred to as double entry accounting.

A company keeps track of all of its transactions by recording them in accounts in the company’s general ledger. Each account in the general ledger is designated as to its type: asset, liability, owner’s equity, sales/revenue, expense, profit, or loss account.

Balance Sheet and Profit & Loss

The balance sheet is also known as the statement of financial position and it reflects the accounting equation. The balance sheet reports a company’s assets, liabilities, and owner’s (or stockholders’) equity at a specific point in time. Like the accounting equation, it shows that a company’s total amount of assets equals the total amount of liabilities plus owner’s (or stockholders’) equity.

The profit and loss or income statement is the financial statement that reports a company’s sales/revenues and expenses and the resulting net profit/income. While the balance sheet reports one point in time (the FINAL Balance at a date), the profit & loss covers the total amount over a time interval or period of time (eg a month). The profit and loss will explain part of the change in the owner’s or stockholders’ equity during the time interval between two balance sheets, as the profit or loss is reported on the balance sheet.

Understand the Balance Sheet HERE

Understand the Profit & Loss HERE

Learn why Profit does not equal Cash HERE

Need help? Not sure? Call for FREE 30min advice / strategy session today! 0407 361 596 Aust

***BEFORE you BUY accounting software, or upgrade – Ask us for a competitive software price BELOW retail – no obligation!

You also get FREE 30 min to assist in setting up your company in the software, and FREE ongoing email or phone support – no-one offers as much!

Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Reckon/Quickbooks Online – Is GST being added twice?

A client had a customer that emailed asking if GST had been added twice in the Reckon Online during the bookkeeping. She wrote – “Can you check the adding up, it seems to be charging me GST twice – the $252.20 included $25.22 GST and then $5.22 plus $14.00 = $271.42 but the account has added $27.14 again. Think I owe you $271.42 not $298.56”

Upon investigation, just looking at the Invoice in the software confirmed that there was confusion as she allowed GST  for the $252.20 but not for the $5.22 and $14.00 in her total! And the total is not correct either –

The total of 252.20 + 25.22 + 5.22 + 14.00 = $296.64 !!!!

The Reckon Online invoice showed –

Reckon/Quickbooks Online – Is GST being added twice?

Reckon/Quickbooks Online – Is GST being added twice?

Yes it is confusing that the $298.56 is incorrectly next to “Tax” under the “Total Tax” to add to the issuer’s confusion, and really should say “Total Due”, in the above shot.

The correct addition is – 252.20 + 5.22 + 14.00 (all ex GST) = $271.42  THEN ADD 1/10th of that is $27.14 – so $271.14 + $27.14 = $298.56

Does the printed invoice show different?

I asked the customer to forward her email so I could check the printed invoice to see if it matched the screen allocation.

Need help? Not sure? Call for FREE 30min advice / Strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Reckon/Quickbooks – Online and PC – Customising templates – Can I copy form 2007/2008 to Online and what format is the logo?

 

Reckon/Quickbooks – Online and PC – Customising templates – Can I copy form 2007/2008 to Online and what format is the logo?

Reckon/Quickbooks – Online and PC – Customising templates – Can I copy form 2007/2008 to Online and what format is the logo?

Client emailed asking why they can’t email invoices – they have tried everything with Windows 8.1 and Reckon settings. Even tried to locate outlook but can’t locate in 8.1. Can we help please?

If you have problems when trying to save as a PDF or when emailing from Accounts Business, try assigning the QuickBooks V4 PDF Converter to its own printer port. Close Accounts Business and delete the printer files QBPRINT.QBP and wpr.ini. If you need help just follow the guide here. Open Devices and Printers > Right click QuickBooks V4 PDF Converter, select Printer Properties and then click into the Ports tab. To assign QuickBooks V4 PDF Converter to its own port and Click Add Port > Highlight ‘Local Port’ then click New Port > Enter a name > Okay > Close. Now you’ll need to configure the new port. Click into the Advanced tab then: Select ‘Spool print documents so program finishes printing faster’ Un-tick the check box labeled ‘Enable advanced printing features Select ‘Print directly to printer.

Now open your Task Manager (Ctrl Shift Esc on your keyboard) > Open the Processes tab, right-click splWOW64.exe and select End Process. Accept yes to the warning. (Windows 8 users must use Background Processes > Spooler Subsystem App > Print Spooler). Close both the Task Manager and Printer Properties windows then delete your print files again. Right click your Accounts Business desktop icon and under the Properties tab set the Compatibility to ‘Run As Administrator’. If your PC is a Windows 7 or earlier, we recommend you select ‘Run this program in compatibility mode for’ and select Windows XP (Service Pack 3)). Reboot your PC and see if it works now.

Other things to consider:

As Windows 8.1 and Internet Explorer v11 were released after the current versions of Reckon Accounts Business, Personal and Hosted were released, our products have not been tested with these new systems. Later releases will be fully tested and compatible. Here are a few tips on some configuration changes to make to ensure your product runs smoothly on the latest operating systems.

  • Program Icon – turn on Run As Administrator: Properties > Compatibility. Older versions may need to run in compatibility mode for XP sp2 as well.
  • Internet Explorer – add Reckon websites to Compatibility View Settings
  • PDF converter – assign it to its unique port.
  • Online Activation requires enhanced Protection Mode to be turned off
  • Reckon Accounts Hosted should update to the latest Citrix Receiver which is compatible with Windows 8.1

Here are the details. Installing for the first time on Windows 8.1 Not all required features to install Accounts Business are turned on by default in Windows 8.1.

  1. Turn on .Net Framework 3.5 – Programs & Features > Turn Windows features on or off > tick Microsoft .NET Framework 3.5.1.
  2. Ensure all sub-folders are ticked.ll get a message that Windows will go to the internet to download and install the service. If Windows fails to connect to the internet (despite your connection being good), refer to http://www.quicken.com.au/kb/issue_view.asp?ID=4693 for further directions. You may find that Accounts Business is denied access to Network drives. This is a security measure by Windows 8. See http://www.quicken.com.au/kb/issue_view.asp?ID=4886 for full steps to allow access to network drives (you may want to consult your IT professional first as it requires changes to your registry)

Need help? Not sure? Call for FREE 30min advice / Strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Reckon/Quickbooks – Tax Codes on General Journals

 

Reckon/Quickbooks – Tax Codes on General Journals

Tax Codes on General Journals

When constructing  a general journal (GJ), you may have seen that tax codes cannot be directly assigned to the lines. You can only associate the actual tax (GST) amount in the total, directly to the tax account (eg GST Payable account), the taxable amount will not be able to associate with the tax account.

As an example if you were to entering a general journal of:

    Debit Expense 900.00

    Debit GST Payable account 70.00

    Credit Bank 970.00

The Tax Agent (in the Name column) will be automatically associated with the tax account (GST Payable account) as according to your tax (GST) setting. Besides, you can select the relevant Tax (GST) Item at the Tax Item column.

The debit of 70.00 to the tax account (GST Payable account) will be updated in the Tax Agency Report (GST).

But note that GJs like this are best used for ADJUSTMENTS to tax accounts, because the transaction will not usually be included in Tax Code Detail and Summary Reports, as these gather data from anywhere a Tax Code is used, not when an amount is allocated to the account.

To include tax in the Detail and Summary reports for preparing BAS it is best to use the Invoice, Bill or Write Cheque transaction types instead of a General Journal.

Need help? Not sure? Call for FREE 30min advice / Strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right! Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Reckon/Quickbooks – Combine Multiple Company Reports

 

Reckon/Quickbooks – Combine Multiple Company Reports

Reckon/Quickbooks – Combine Multiple Company Reports

Do you have multiple companies with data stored in separate Reckon/QuickBooks files, and need to consolidate reports? Do you know how to combine each company data in one report? Some versions of Reckon/QuickBooks (eg Enterprise xxxx) have a built-in feature designed with this task in mind. The Combine Reports from Multiple Companies feature will enable you to create reports that combine the Balance Sheets, or Profit and loss, Statements of Cashflows and more. The combined data is exported as a Microsoft Excel spreadsheet, and you can further manipulate as required.

This applies to Reckon/QuickBooks Enterprise Solutions. It may vary slightly or significantly with other versions or products.

  1. Launch QuickBooks and open a QuickBooks file from the first company with which you want to work.
  2. Click “Reports” on the main menu and select “Combine Reports from Multiple Companies.”
  3. Click “Add Files,” locate the second company file, select it and then click the “Open” button.
  4. Select the reports for which you want to view combined information. Available reports are listed in the Select Reports For Combining section.
  5. Enter the date range you want to use in the From and To fields, respectively.
  6. Click your desired report basis.
  7. Click “Combine Reports in Excel” to display the combined report from the two companies in a spreadsheet.

Need help? Not sure? Call for FREE 30min advice / strategy session today! 0407 361 596 Aust

***BEFORE you BUY Ask us for a competitive software price BELOW retail – no obligation!

You also get FREE 30 min to assist in setting up your company in the software, and FREE ongoing email or phone support – no-one offers as much! Call and you also get Free “Avoid these GST mistakes” – there’s 18 that the Tax Office see regularly – get them right! Email info@accountkeepingplus.com.au or call 0407 361 596 Australia


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Reckon Account Right (formerly Quickbooks) – Compulsory recording of super payment on payslips

Compulsory recording of super payment on payslips

Compulsory recording of super payment on payslips

There is a new requirement to include the Super Payment Date on payslips, as announced in the Government Budget in May 2011. It is now a legal requirement from 1st July 2013.

To record Reckon 2013-2014 Account Right (formerly Quickbooks in Australia) the compulsory recording of super payment (expected payment date) on payslips, we need to add a field to the payslip.

To show the Super Payment Date (when you expect to pay) on a Payslip you will need to do the following:

1. Activate the Super Payment Date feature;

a. Edit > Preferences > Payroll & Employees > Company Preferences;

b. Tick the box Super Payment Date on Payslip;

c. Click OK.

2. Manually Insert the Super Payment Date when you are processing payroll (have to remember to do):

a. Pay Employees > Enter Payroll Information

b. Now enter the date you expect the super contributions to be received by the Super Funds in the Super Payment Date (expected on or before) box;

c. Complete the pay process.

3. The Super Payment Date appears towards the top of the payslip, its exact position depending on the payslip style.

Note – The Quicken Custom Payslip doesn’t include the Super Payment Date. Users of this template will need to create a Custom Template and add the Super Payment Date field.

Note – All users with customised templates will need to add a new field super Payment date:

1. Lists > Templates > open your customised template > Layout Designer;

2. Right-click on the template > Add > Data Field

3. Select Super Payment Date > OK

4. Move the boxes to the desired location

5. Format the boxes: Right-click > Font > Select Style and Font > OK;

6. OK and OK to close.

See more at –

http://www.fairwork.gov.au/resources/fact-sheets/employer-obligations/pages/employee-records-and-pay-slips-fact-sheet.aspx click on What information must be included on the pay slip?

Need help? Not sure? Call for FREE 30min advice / strategy session today!

0407 361 596 Australia

And also get Free “Avoid these GST mistakes” – there’s 18 that the Tax Office see regularly – get them right!