If you’re a business owner, you’re aware of how hectic and time-consuming managing your company’s operations can be. There is plenty to do and so many things to take care of. The last thing you want to consider is bookkeeping when you have so many duties to complete and so many clients to attend to. With a mountain of spending receipts, invoices, and other paperwork piling up, you may be inclined to postpone your bookkeeping duties until tomorrow or next week. Instead of hiring a professional bookkeeper, many small business owners try to cut costs by doing their bookkeeping.
There’s no reason you can’t do it yourself if you have the time and knowledge.
On the other hand, small business owners must realize that poor bookkeeping will cost them a lot of money in the long run. Bookkeeping does not have to be complicated. Small and mid-sized business owners, according to experts, should reconcile their books on a weekly or even daily basis. It will prove to be far more profitable in the end.
Tax Deductions Decrease
Based on the practice itself, there are several reasons why an accountant should not neglect this measure. We suggest starting with the nature of the assets and liabilities for which reconciliation is carried out with counterparties and then moving on to the event itself and its consequences for accounting and tax accounting. Any debt during entrepreneurial activity is associated with accepting certain obligations by persons: to take some action or to refrain from it. By agreeing, each party acts not only as a debtor but also as a creditor, who has the right to demand a counteraction from the other party.
Obligations may arise both from a contract and for different reasons, such as causing harm. Accounts receivable give the organization the right to claim against third parties for obligations that they have not fulfilled, and accounts payable, on the contrary, imposes on it the obligation to fulfill its obligations. The table on the page provides examples of receivables and creditors that may be on the balance sheet of autonomous institutions. As a rule, obligations that have arisen are terminated by their execution. If this is not possible, you can remove the obligation:
- By agreement of the parties – the execution of the compensation, replacement by another obligation (novation).
- By decision of one party – debt forgiveness, set-off of a homogeneous counterclaim.
- Due to circumstances beyond the parties’ control – due to the impossibility of fulfilling the obligation, based on an act of a state body and due to the liquidation of a legal entity.
In addition, the debt can be sold or transferred to another person with the latter’s consent. The accountant needs to pay attention to all cases, in each of which the termination of the obligation is the basis for writing it off the register. If none of these cases has occurred and the duty has not been fulfilled, you can write the debt off after the expiration of the limitation period established by the Civil Code and is three years. Its beginning is determined by the deadline for fulfilling obligations, which is indicated after the contract. Suppose the date of fulfillment of obligations is not specified in the contract. In that case, it is necessary to proceed from a reasonable period after which the debtor is given seven days to fulfill the claim made by the creditor.
How To Reconcile Accounts?
Unfortunately, there are few indications in the regulations for this event. We would single out reconciliation as part of the inventory regulated by the Guidelines for the inventory of property and financial obligations. It follows from them that the primary purpose of the inventory of calculations is to confirm the reliability of accounting for debts and obligations and establish their occurrence and repayment timing. The validity of the amounts of debts for settlements with suppliers and customers, the budget and extra-budgetary funds, employees and accountable persons, other debtors, and creditors are checked. The inventory commission, through documentary verification, must also establish the correctness and validity of the amounts of receivables, accounts payable, and depository debts, including the amounts of accounts receivable and payables for which the limitation period has expired.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
