Accounts Receivable Accounting

Exploring accounting basic, one of the constituent topics is accounts receivable accounting. This topic is closely related to the accrual basis principle, since receivables represent current assets accounted for in the books of business caused by sale of goods or delivery of services. This article expands more on the concept of receivables and their accounting aspects.
Concept
As already mentioned, Accounts Receivable are attributed to current assets category and are accounted for as a result of goods' sale or provision of services. Receivables represent a right of business to claim payment from customers for the sales performed. So this is a debt from customers to the seller which has to be repaid back within the period of time which is agreed by the parties, i.e. seller and customer.
Receivables are accounted for when business sells goods or provides services, however cash from customer will be collected later on. This type of asset is created only when accrual basis accounting principle is applied, which means that sales revenue is recognized despite the fact that cash was not received yet. The following accounting entry is made:

D Accounts Receivable (Current Asset category) $1000C Sales Revenue $1000

When cash from customer is collected, the following accounting entry is made:

D Cash $1000C Accounts Receivable $1000

Since receivables are attributed to the current asset category, their balance is separately presented on the Balance Sheet.
Practical Example
Below you can find simple practical example how to account for receivables. Let us assume that on March 15 company ABC sold goods to its customer company DCF for $5,600. Both parties agreed that DCF will pay for these goods within 30 days from the sale, i.e. the final payment date is April 14. On March 31 customer paid part of the debt for the goods, i.e. $1,300. The remaining part was paid on April 5.
1. On March 15 the following accounting entry is made in the books of the seller:

D Accounts Receivable $5,600C Sales Revenue $5,600

2. On March 31 the following entry is made in the books of seller:

D Cash $1,300C Accounts Receivable $1,300

Remaining debt from customer DCF is $5,600-$1,300=$4,300
3. On April 5 the following entry is made in the books of seller:

D Cash $4,300C Accounts Receivable $4,300

Remaining debt from customer DCF is $0.

Important Factors When Choosing A Business Banking Account

If you are currently searching for a business banking account, there are a number of variables you will need to consider. For example, how convenient are a particular bank's services, and what are the different interest rates that are being offered. The fee structure is also an important factor that you should familiarize yourself with prior to opening a new account.
It is usually beneficial to opt for a bank that has a branch close to your location. Though you may not need to visit a branch on a daily basis, it is important to know that when you have urgent financial work, you can complete the tasks with the least amount of effort and disruption. Many businesses will take cash payments from customers, keeping a large amount of money in your office is not wise, it is essential to know that you can make deposit quickly, and whenever you need to.
Online banking is another important factor. Today more businesses are conducting all their transactions through the internet. You should opt for a business bank account that can be accessed online from any location. If you believe you will be doing a lot of online transactions, make sure that your PC's security suite is up to date.
Personal bank customers do not place as much emphasis on interest rates as should a business. If you have a large amount of capital, this can be placed in a high interest account to help with cash flow. Though it is unlikely that you will be offered an exceptionally high rate of interest on your holdings, even a small increase in capital can be extremely desirable in these days of economic uncertainty.
For every business, no matter what the industry, credit cards can be of great value. When paying vendors, it can be easier to do so with Visa or MasterCard. When checking out various accounts, find out what type of credit cards would be made available, and what charges these would come with. You should also find out what fees are levied for using the cards in other banks ATM's.
On a final note, it would be desirable to find a bank with which you can develop a good rapport with the staff. If you already hold other accounts, it can be worth finding out whether the banks you are a customer of can also offer you a business banking account. You will find that the service is more friendly by using the same establishment for all accounts.

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What Do CPAs Recommend?

Payroll services for small business has become big business. Payroll service providers have come out of the woodwork and give business owners a slew of providers and software to choose from. As with most things in life and business, not all payroll service providers are created equal. Business owners and controllers need to be cautious and diligent in the decision to outsource their payroll responsibilities.
The IRS states "Outsourcing payroll duties can be a sound business practice, but employers who outsource some or all of their payroll responsibilities should know the employer is ultimately responsible for the deposit and payment of federal tax liabilities." The employer, not the service provider, is the responsible party for all taxes, penalties and interest. The IRS aggressively goes after payroll related taxes, more so than any other type of tax. Diligence in selecting your payroll service provider is extremely important.
A great place to start your due diligence in selecting a payroll provider is with your Certified Public Accountant. Your CPA works with many business entities and probably knows many payroll providers personally. Your CPA can make solid recommendations to you based on experience and personal knowledge. In fact, your CPA may offer payroll as a service. This has become a trend with CPAs because of the great influx of fly by night payroll service providers that have sprung up across the nation. CPAs are spending more and more time correcting payroll errors made by these payroll services and their clients are paying small fortunes in fees, penalties and interest as a result of mistakes made by the payroll providers.
Partnering with the right payroll provider will give you peace of mind by assuring your compliance with the taxing authorities and will save you both time and money. Business Payroll Solutions is an example of the type of payroll partner CPAs recommend. Over ninety percent of their clients are direct referrals of CPAs. Business Payroll Solutions was developed by a team of Certified Public Accountants and this is one key aspect you want to look for in your search for the right payroll partner for your business. Other key indicators of a CPA involved payroll service provider include:

• You are given a personal dedicated payroll specialist who you will communicate with each pay period. Your payroll specialist will get to know you and your business resulting in superior personal service. Your specialist will be able to recognize problems in your payroll file before they happen.
• You are given access to a Certified Public Accountant. The on staff CPAs provide you with an invaluable resource.
• You are not the only party with "skin in the game". The IRS holds the business owner responsible and the IRS also hold CPAs responsible. CPAs are registered with the IRS and are held to a higher standard by the IRS. The only others held accountable by the IRS to this degree are attorneys and enrolled agents.
• Your payroll taxes are not impounded! A CPA knows the value of your money and the importance of cash flow. (Did you know that the national payroll providers make more money from impounding your payroll taxes than from providing payroll services?)
• You will stay off the IRS radar.

Do your research before you make the important decision of hiring a payroll service. Payroll compliance is serious business and getting it wrong can put you out of business. Be diligent, ask your CPA to personally recommend and introduce you to a payroll service provider.

The Perfect Tool For All Businesses

Business Accounting Software is utilized by businesses to record a business accounting process. The software is an application which usually records accounts receivable, accounts payable, trail balance and payroll and other applications. Depending on the companies requirements and how large the company staff complement is, the application software can either be developed 'in-house' and especially designed for the companies needs and requirements, or it may be purchased as a complete package form a third party, one other aspect that could be considered is combination of application software and a third party package, this could also be installed with local modifications.
Understanding the various applications of business accounting software:

• Accounts payable - a company enters its bills and the pays the money it owes.
• Accounts receivable - When a company receives money it is entered into a database.
• General Ledger - A general ledger is the company's books, in a software application this is also the case.
• Billing - the creation of invoices to be sent to customers and clients.
• Stock / Inventory - and inventory of stock is kept on the database and updated on regular basis.
• Purchase Order - a record of orders is kept of what has been placed for stock.
• Sales Order - customers orders are recorded and supply compared against inventory
• Cash Book - the company is able to record collections of money and payment
• Debt collection - this is where the company will track and keep a record of all attempts to collect bills that are overdue. In some packages this falls under accounts receivable.
• Electronic payment - this is the processing of payment via electronic media such as internet banking.
• Expenses - employee businesses related expenses will be recorded.
• Inquiries - checking of information on a screen without any editing or additions.
• Payroll - Salaries, wages and taxes are recorded and tracked.
• Time Sheets - professional businessmen will record their time worked so they can bill clients this is often used by consultants and attorneys. Companies can also record employees' time on timesheets to work out wages.
• Purchase requisition - requests for purchases are made and then approved once approved they are then tracked to delivery.

Not all business accounting software packages will have all of the above applications but you will find many of them have the most important ones relevant to a company's business needs.
The installation and configuration of these packages for a client depends on the needs of the particular company or business. Many middle market or larger organizations have applications that are sold exclusively through a reseller, developer or consultants. These organizations usually ask for a license fee plus charge the client for installation, maintenance of the systems and upkeep.
Some of the important types of accounting software covers the following industries:

• Banking institutions
• Construction companies
• Daycare organizations using child care management software
• Medical institutions
• Non-profit organizations
• Point of sale - the retail market

Companies make use of business accounting software because it offers greater accuracy and reportage of the company's business expenses, the income and outgoing of stock, and money. Many of these software packages offer better account reporting than done manually, as well as excellent tracking of expenses.