Accounting & Payroll Blog

Computer software can do everything a bookkeeper needs–except for bookkeeping.

An account’s normal balance is the side on which an increase is recorded. Some accounts have a normal debit balance; others, a normal credit balance.

As you know,

• asset accounts have a normal debit balance
• liability accounts have a normal credit balance
• owners’ equity accounts have a normal credit balance
• revenue accounts have a normal credit balance
• and expense accounts have a normal debit balance

That means if you spot an expense account on the trial balance with a credit balance or a liability with a debit balance, you want to examine it before you actually do your trial balance and make the adjustments But what about the normal balance of contra accounts? A contra account is directly related to a specific asset, liability or stockholders’ (owners’) equity, revenue or expense account–but has the opposite normal balance of its related account.

Here are some examples:

· Asset contra accounts. Accounts Receivable has a debit balance; its contra account, Allowance for Doubtful Accounts, has a credit balance.
Equipment has a debit balance; its contra account, Accumulated Depreciation–Equipment, has a credit balance.

· Liability contra accounts. Bonds Payable has a credit balance; its contra account, Discount on Bonds Payable, has a debit balance. · Owners’ equity contra accounts. Most owners’ equity accounts have a normal credit balance, but Treasury Stock has a debit balance and is treated as a contra account to total Owners’ Equity (rather than to a particular account). Dividends Declared has a debit balance and is a contra account to Retained Earnings.

· Revenue contra accounts. Sales has a credit balance; its contra accounts, Sales Discounts and Sales Returns and Allowances, have debit balances. · Expense contra accounts. Purchases has a debit balance; its contra accounts, Purchase Discounts and Purchase Returns and Allowances, have credit balances.

When Correct Account Balances May Not Be Normal Generally, an account balance that is not normal is incorrect, but there are exceptions. For example, if a company overdraws its bank account, the Cash account (normal debit balance) will have a temporary credit balance. Similarly, if bills are overpaid, Accounts Payable (normal credit balance) may have a temporary debit balance. If a company is operating at a loss, Retained Earnings (credit balance) may have a debit balance. Eying the Trial Balance When reviewing the trial balance for errors, the first step is to eye the accounts to see that each account’s balance is in the proper debit or credit column. Source: AIPB

Here is the answer to email I received this morning.

Our Norwegian Company has just started up a business in Nevada. We are going to run the business from Norway in the beginning, so we need someone to send out invoices for us till two of our employees moves over to the US. So, basically, we just need a person to print and send our invoices. As we grow and our employees moves over, we will need regular accountant and payroll services as well. What will this cost (the invoicing only – if you do stuff like that)?

Let me give you first my suggestion. Invoices can be sent by email/fax in the USA. There is no requirement to send hard copy like in many countries in Europe.

The most used program for accounting is QuickBooks. QuickBooks will email invoices for you. They have several versions. I like the Online Edition the best. You can login to QuickBooks Onine through Internet Explorer. Issue invoices, email them to customers. You can also give access to accountant in the USA to do adjustments. It is very easy for people working in remote locations.

QuickBooks online doesn’t track QUANTITY of inventory items. It can track only VALUE of inventory.

Here is the help how to set it up. Go to COMPANY -> CHART OF ACCOUNTS and follow the instructions.

As a business owner you have a lot of tasks and problems you have to solve every day.  One of them is to deposit regular installments of federal income tax. I, myself usually forget what are the due dates in the day to day rush. Therefore I check this Tax Calendar page. (Just bookmark it and come back to see what are different IRS deadlines).

For example if you own C-Corporation then you have to pay installment for federal income tax. It is based on estimate. If you see that your tax will be $50,000 based on your QuickBooks then pay 25% ($12,500).

What is the best way to pay? You can mail check, but I personally prefer to pay electronically using EFTPS.com. Eftps is IRS system for electronic tax payments.

Having a great system is extremely important. You as a customer will exactly know what work we are doing for you. You will be able to update the instructions online. The same for us. We want to make sure that we are doing what is required on your account.

For each account (bank statement, credit card statement, merchant account…) we create instruction sheet. You will be able to review it online and do modifications. The sheet shows instructions and notes how the transactions should be handled.

See details of how we set up instruction for each account. This is an example for credit card account reconciliations.

Why is this so important?

1. If your company is growing fast you might need to hire in-house employees to take care of bookkeeping. You will need good set up and system in place. We do it for you.

2. If you fire us for whatever reason you will have great set up and any other company can easily continue on our work. It might sound crazy that we are doing something like this and you can see there are not many companies who will be so open and working for your interest.

3. When you business is organized like it is great foundation for growth while keeping expenses extremely low.

The usual mentality is to no to let customer understand anything so he has to stay with the bookkeeper forever. Our main interest is success of your business. We believe that we get it ten times back in referrals from satisfied customers. We don’t want to tie anyone to us by force. You will see that we provide great value. Once you feel that you can get better deal somewhere else we will make it very easy for you to switch.

 Our goal is to set up very EASY and SIMPLE system for your bookkeeping. This also means very inexpensive and efficient.

Yes, we can. You can email us or fax us copy of each invoice you issue and we will enter it in QuickBooks. It is no problem at all.

We can also teach you or anyone on your staff how to do it and save some time with retyping. QuickBooks is a great program and we can really help you streamline your business and make it more efficient.

If you are doing business in Nevada you have to file Nevada Modified Business Tax Return.

It is due every quarter. And here is what the form looks like:

The form looks complicated, but it is actually not very difficult to fill out. If you use our Bookkeeping or Payroll program we will do it for you at no cost. Just let us know that you need us to file this form.

Instructions how to complete this form:

Total Gross Wages
(it says same as on Line 3 of ESD Form NUCS 4072). This is the same number you have fill out on the form called EMPLOYER’S QUARTERLY CONTRIBUTION AND WAGE REPORT. If you use our Payroll program we file this form for you automatically. So you can just take then number from the line 3.

Enter deduction for paid health insurance
The easiest way is to go to your QuickBooks and find the expense account you use for writing health insurance bills. QB -> Company -> Chart of Accounts

For example we use expense accounted called: Health & Dental Insurance. Click on detail and choose Customize. Select Last Quarter. You will see all payments for health insurance and include the number on the line 2.

The rest of the form is self explanatory. Deduct line 1 minus line 2. If you don’t have any overpayment, credits, offsets or penalties than you just enter zeros. Write taxable wages minus health on the line 6. Line 7 is for calculating the actual tax 0.0063 x line 6. Sign, date and mail with check to Nevada Department of Taxation.

Useful links:
Nevada Department of Taxation Forms
Modified Business Tax Forms - I like to use the Internet forms, because they let you fill it out on computer instead of typing manually.