Tag Archives: accounting advice

12.10 2021

Preparation for 2021 Year End Procedure

The end of the year is a busy time for businesses. Most of business owners probably start preparing for end of year accounting procedures. We are here for you. Let’s organize your business and wrap up 2021.

Simple Checklist for Year End Accounting

First of all, your accounting books should be organized. Record up to date business transactions to jumping into closing book.

  • Gather necessary documents.
  • Organize business receipts to monthly folder.
  • Reconcile bank accounts and credit cards.
  • Review financial statements.
  • Review Account payable and Account Receivable.
  • Collect outstanding invoices from customers or Remind them.
  • Payoff bills to vendors.
  • Account for inventory.
  • Make necessary transaction adjustments.
  • Backup information in a secure place.

Once you complete above, it is a time to check with your accountant to see if there are any additional documents or procedures need for the upcoming year 2022 and tax season.

Two more important things:

  1. Make sure personnel information with employees. You must update employee information such as address to send their Form W-2 (wage report).
  2. Contact to independent contractors if business paid them over $600 during 2021. If you do not see tax ID, ask them to fill put Form W-9 to collect necessary information. So, you are ready to issue Form 1099-NEC.
01.18 2021

Second PPP Loan

New COVID relief bill, Paycheck Protection Program passed congress on December 22. A second PPP Loan will be available. Here is a guidance you need to know.

Who is eligible for a second PPP loan?

Similar to the initial PPP loan, eligible small businesses may include:

Small businesses, Non-profit organizations, Sole proprietors, self-employed individuals or independent contractors

Addition to this, applicants must also meet the following

  • Businesses were in operation prior to February 15, 2020.
  • Businesses has a loss in revenue in 2020, which must be proved a 25 % or more reduction in gross receipts from any quarter in 2020 relative to the same quarter in 2019.
  • Businesses may not have more than 300 employees.
  • Businesses have used up or will use the full amount of their first PPP loan

SBA will provide further guidance such as application processes and required documentations. For the time being, let’s talk learn about any changes made and how those changes could affect you.

PPP Eligible expense list are added

  • Operational expenses

Payments for software, cloud computing, accounting needs and other human resources

  • Supplier costs

Expenditures any purchase order, or order for goods made prior to getting a PPP Loan essential to operate

  • Property damage costs

Property damage costs due to public disturbances that occurred during 2020, which are not covered by insurance

  • Worker protection expenses

Any personal protection equipment or property improvements and adaptive investments to help a borrower comply with COVID-19 related safety guidance during the period from March 1, 2020 onwards.

PPP expenses are tax deductible

Any expenses covered by a PPP loan can be claimed as tax deductible. The forgiven amount of PPP loans will not be included in taxable income.

12.28 2020

Bank Reconciliation

First, what is a bank reconciliation?

When you reconcile your bank account or statement, you compare your internal financial records such as bookkeeping records against the records provided by financial institutions.  A monthly reconciliation helps your business to detect discrepancies and errors as well as identify any unusual transactions that might be caused by fraud actions. In other word, this practice can help your business inefficiencies in accounting procedures.

 

         How often to reconcile bank statements?

Many business performs monthly bank reconciliation for identifying problems. It is the best to have a regular schedule and save bank statement or other related document for avoiding time-consuming task.  Some businesses with a lot of transactions, reconcile on a daily basis.  If something does not match with your record against bank statement, it might be due to timing differences that items or checks have not yet cleared. However, bookkeepers and accountants should be able to explain those differences.

 

Once you have figured out the reasons why bank statement and records do not match up, you need to record them by making adjusting journal entries.

 

Best Bank Reconciliation Practice and Tips

To reconcile bank accounts, you need to compare your internal record of transactions, balances, and descriptions to your monthly bank statement. Make sure matching the amounts and stating any memo or note for differences that requires more investigation and detail.

 

12.18 2020

Fill out your PPP Forgiveness Application Form


SBA released the official form to fill out for applying forgiveness on PPP Loan. Now that lenders are opening up for forgiveness applications. It is time to start prepare the documents need to qualify for full foreignness.

There are some documents and information requirements are universal to prove if you used the PPP Loan to cover any of following.

– Payroll costs

To prove payroll costs, you need to prepare:

  • Payroll service reports documenting wages and salaries paid to employees
  • Federal payroll tax filing (IRS Form 941 / 943)
  • State quarterly Payroll, Income, and Unemployment insurance reports
  • Receipts* for employee contributions to employee benefits
  • Receipts* for any retirement plan contributions

– Owner compensation

To prove owner compensation payments, you need t prepare:

  • 2019 Schedule C (or January to February 2020) for Sole Proprietorships
  • 2019 Form 1099-MISC (or January to February 2020) for Independent Contractors
  • 2019 Schedule K-1 (or January to February 2020) for Partnerships
  • Receipts for compensation payment

If there is more than one individual included, provide a separate document that lists the names and payments to each owner.

– Mortgage interest payments

        To prove mortgage interest payments, you need to prepare:

  • Mortgage amortization schedule or mortgage account statements
  • Receipts or cleared checks 

– Rent/ Lease payments

        To provide rent/ lease payments, you need to prepare:

  • Current Lease agreement and receipts or cleared checks 
  • Lender monthly account statements

– Utilities payments

        To prove utilities payments, you need to prepare:

  • Monthly utilities statements or involves
  • Receipts, cleared checks, or account statements

*Payment receipts, cleared checks, or account statements documenting the amount that the Borrower included in the forgiveness

What is next?

Once you have prepared all documentations, it is time to fill out the application form and upload supplemental documents into your portal.

 

Accounting Tips: Educate Your Employees

Why is it important to have strong internal control within an organization?

        A control environment is made up of a compilation of an entity’s organizational structures, policies, standards, and processes that maintain control across the organization. Having effective control environments with adequate internal control is essential for businesses to reduce the risk of asset loss and ensure reasonable assurance for stakeholders and businesses. Moreover, implementing a strong internal control, businesses establish solid protocols and procedures for their employees and partners. It allows businesses to prevent fraud and theft by separation of duties and organization of financial and management information.

Here are some best practices that should mitigate issues from happening in your business.

  • Segregation of Duties
  • Physical Controls
  • IT Controls
  • Accounting Standards and Policies 
  • Ethical Learnings

We strongly recommend to educate and train your employees for prevention of fraud as well as errors and mistakes.