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Double entry bookkeeping stretches back centuries perhaps even as early as the 12th century and is now accepted worldwide as the accounting standard to be employed by all companies in recording the financial accounting records. The first written explanation of the accounting system was reportedly by a Venetian mathematician Luca Pacioli towards the end of the 15th century.

The accounting industry has grown somewhat since then and today contains many technical words known but largely ignored by non accountants. The understanding and desire to understand accounting terms is further confused by the banking industry while adopting double entry bookkeeping as standard use what appears to be diametrically opposed terms in the presentation of information to their customers.

In accounting terms an asset such as money in the bank is a debit balance, while bank customers are told if they have money in the bank it is a credit balance. This arises because what the bank is really saying is when a customer has money in the bank that the balance represents a creditor to the bank as it owes the customer money and is a creditor in the banks books. Hence the bank describes the balance as a credit balance.

The simplest way to understand double entry bookkeeping is the understanding that every financial transaction has a double effect. One effect is to change the profit and loss of the business with sales income increasing the financial profit and purchases reducing the financial profit. While the double entry is that every profit and loss transactions also has a balance sheet effect in either increasing assets or increasing liabilities.

In more complex accounting areas such as journal entries or bank transactions both sides of a transaction may have no impact on the profit and loss account as both sides of the double entry effect the value of balances in the balance sheet. For example when a creditor is paid the bank balance reduces and the amount owed by the business reduces by the same amount.

The greatest value of double entry bookkeeping to a business is its ability to show in numerical terms the profitability of the business to generate improved financial performance and management while also producing a statement of assets and liabilities. These factors are important to accountants too although the greatest benefit to an accountant is that because every transaction has an equal and opposite entry a mathematical check can be produced to ensure all financial transactions have been recorded accurately.

This mathematical balance is when all the financial accounts into which the financial transactions have been entered are listed and added up and if all transactions have been entered correctly the total is zero. This is called the trial balance.

The function of accounts clerks and bookkeeper is to record the prime documents such as sales invoices and purchase invoices into the financial ledgers. Cash and bank records must also be entered. And for every entry made there must also be the opposite entry into the business financial ledgers such as sales ledger, purchase ledger and bank.

Accounting software is basically a database of these financial transactions that automates the double entry enabling a single transaction to be entered once by the user but create the second entry in the company financial accounts. Using accounting software which all but the smallest companies adopt as a standard business tool ensures greater accuracy and usually produces a self balancing trial balance since the accounting software always produces a second equal entry to the one being input to the financial system.

The task of an accountant is first of all to ensure the prime documents are entered accurately and then interpret the results produced by the trial balance into financial statements and reports in a format that aids the financial management of the business and ensure those financial figures also represent a true and fair view of the financial position.

Limited companies must produce a balance sheet under various financial acts and submit the balance sheet to both Companies House and the tax authority each year. Different rules apply to a limited company as opposed to self employed business because the accounts including the balance sheet are public records available to the members of that company and not necessarily the property of a single individual or partnership.

Self employed business in the UK are not compulsory required to produce a balance sheet and consequently may choose to operate a single entry bookkeeping system rather than double entry. By adopting a single entry system the self employed business has less financial control over the assets and liabilities although this is often not a problem as the self employed in smaller businesses often know exactly what the individual assets and liabilities of the business are.

In smaller businesses that may not have adopted accounting software it is a common practise for the bookkeeper to maintain day books.

A sales day book would be a simple list of sales invoices issued and by recording against those financial transactions the sales receipts as they are received the sales day book effectively becomes a sales ledger in that it shows the debtor balance owing to the company.

A purchase day book would be a list of purchase invoices received and by recording on the purchase day book the amounts paid to each creditor that day book effectively becomes the purchase ledger.

Terry Cartwright is a qualified accountant in the UK designs Accounting Software on excel spreadsheets providing complete Small Business Accounting Software solutions for with single and double entry Bookkeeping systems for both limited companies and self employed business.

With the rising cost of everyday items today creating a family budget plan is becoming more and more important to keep track of where your family’s money is going. Making your money work for you is the ultimate goal of any budget, but you need to be patient if you have never made a budget before.

Most financial problems, both personal and family, are a result of poor budgeting skills or the failure to follow the budget that is made. This is true of people in all income ranges. If you want financial freedom you need to be bale to track your assets and liabilities and your income and expenses.

The fact is that people of all income levels have the same struggles with money. People who earn thousands of dollars per pay check can have the same financial problems as those who earn just a thousand dollars per pay check. The problem isn’t the amount of money one makes at their job; it’s their behavior with their money once they get that paycheck. And the financial behavior of the majority of people is very poor.

A family budget plan is nothing more than a cash flow plan. A plan for your money. We make plans for everything else, from where we are going on vacation to blueprints for houses, but we seldom make a plan for our money. And if there is no plan then your money does not know what it is supposed to do other then get spent on stuff.

A good budget, once you get the hang of it which can take around three months, should take all of your family income and outgoing expenses into consideration. There should be a balance between the income and expense side of the equation. If not then it is time to start finding areas to cut back on. As you work your budget over time it should free up enough money that you can start making allowances for savings and retirement accounts.

The first step of any family budget plan is writing down on a piece of paper your total monthly income and your total monthly expenses. When writing down your expenses be sure to include everything from your biggest payment to the smallest expense. Subtract the expenses from the income and see if anything is left over. If not then you can start looking at the expense column and start cutting out unnecessary items that are costing money that could be better put to use else where.

If you have money left over you need to seriously consider where this money needs to go. If you have debts such as credit cards or car payments it is wise to put some or all of this money towards paying them down. If you have no extra debts start saving and investing. Before long you’ll have a nice little nest egg built that will secure your family’s future.

If you are having trouble keeping within your family budget plan here are four quick tips that can help you meet your goals.

1. Keep a log book or ledger where you can list you income and expenses on a daily or weekly basis. One of the hardest things for most people is keeping track of their daily money habits.

2. When buying groceries make a list before you go and buy all your groceries at one time. Make sure to stick to your list and do not buy things that are not on it.

3. Don’t go to the store if you do not need to buy necessary items. Impulse buying is a budgets worst enemy.

4. If you are tempted to buy something think about it before you make that purchase. For large items over $300 or so take a day to think it over. Chances are you don’t really need whatever it is.

To learn more about building a family budget plan please visit the website Household Budgets by clicking here.

Small non-profit organizations are very vulnerable to fraud.When I say small, I mean small: organizations that raise less than $100,000 per year and have only one paid staff person or no paid staff persons. I’m talking about neighborhood associations, sports and recreation leagues and all manner of civic, political and religious groups.

These small organizations are vulnerable to fraud for three reasons:

1.The person responsible for collecting and disbursing funds is also the individual who provides the financial reports.
2.Many small organizations raise much of their funds in cash. Cash is more easily misappropriated than checks.
3.Small non-profits are run by trusting and committed individuals. Sadly these individuals tend to be too trusting.

Here are some sadly typical fraud scenarios:

1.Cash collected at fund raising events is siphoned off by the organization’s treasurer or some other individual with access to cash collections.
2.The treasurer writes checks to themselves out of the organization’s checking account.
3.The treasurer makes unauthorized and inappropriate payments to vendors for products and services for their use rather than the organizations.

Example. Onandon is a non profit organization devoted to helping the children of parents who were excessive talkers. Appropriately enough their major fund raising events are silent auctions. Most of the donations at these auctions are made in cash and deposited in the organizations checking account. The long standing treasurer, Mal Feasance, has been skimming cash proceeds from these events to the tune of about $300 per auction. Plus he has been writing checks to himself in the amounts of about $2,000 per year for several years. Mal has complete control over the checking account and prepares all the financial statements.

Ounces of Prevention

There are three relatively inexpensive and effective ways to prevent and detect these common frauds;

1.Proper Control of Bank Statements
2.Requiring two signatures on every check
3.Preparation of Budgets

Bank Statements

If an organization has a treasurer who collects and disburses funds from a checking and/or savings account, the monthly bank statements should be sent directly to some other board member of the organization before it is passed on to the treasurer. The recipient of the bank should examine the canceled checks to see that disbursements have been made to only appropriate persons or vendors in reasonable amounts. Using this control would prevent Mal from writing checks to himself. Note: this ounce of prevention will not work unless the person receiving the statement actually opens the statement and examines the canceled checks. If the person receiving the statements just passes them along without opening the envelope, this sends absolutely the wrong message to the treasurer.

Two Signature Check Policy

Require that every check have two signatures. Barring collusion, this would prevent someone like Mal writing checks out to himself. The requirement of having two signers on a check definitely can slow things down and prove cumbersome. But loss of efficiency and convenience is a reasonable price to pay for protecting an organization’s scarce resources.

Budgets

Every organization should have an annual budget approved by the board of directors. The idea is to have a reasonable expectation of revenues and expenses. With a budget actual results can be compared with expected results. If actual expenses are greater than expected this could be an indication that inappropriate expenditures are being made. Similarly, if proceeds (particularly cash) are being deposited at less than expected levels this might indicate that skimming is taking place.

If the organization has cash fund raisers such as dinners, car washes, bingos and so on there ought to be budgets for each event. In the case of fund raisers such as car washes, bingo games and the like it is fairly easy to test for cash theft. Some person other than the person responsible for handling and depositing the cash ought to perform a count of the cars washed, bingo cards sold and apply this number to the unit price to compute the expected amount of cash raised.

Example. Suppose Onandon has a bingo game at which cards are sold for $15 apiece. If 200 cards are sold, the net cash deposit should be $3,000.

A Question of Trust

There is a trade-off involved in implementing the above fraud controls in small organizations. These controls assume that responsible individuals may not be fully honest. When people work closely together in small organizations it is natural for trust to build over time. But diligent observation of fraud controls requires people to maintain a certain degree of distrust. This means that small nonprofits have to be willing either to maintain a degree of mistrust to protect their assets or maintain trust and risk loss of their assets. This is usually not an easy trade-off to make.

The Responsibility of the Board of Directors

It is the responsibility of the board of directors to insure that adequate controls are in place to protect the organization’s assets. In small organizations it will be necessary for actual board members to be involved in the implementation of the controls discussed here. It is also important for board members to understand why these controls are necessary. If board members lose sight of the importance of these controls they are apt to become lax in their implementation and as a consequence the organization’s assets will be placed at risk.

Michael Sack Elmaleh is a Certified Public Accountant and Certified Valuation Analyst. His book, “Financial Accounting: A Mercifully Brief Introduction”, has received wide critical acclaim. He has nearly 30 years of accounting and 10 years of teaching experience.His web site is understand-accounting.net

Running a day care center is challenging enough without financial accounting problems. Picking the best day care accounting software is an important decision, as it will store all of the critical business accounting data and client data of your day care center.

The first step in picking the best software is to survey what is currently available.

There are many generic financial accounting solutions available, but they will not provide the day care industry-specific features that specialized day care accounting software may provide.

Start by researching in industry publications and talking with other day care owners, but also use the power of the Internet to find and research all available options.

Look at the system requirements for each of the software options you have found. If any of them will not run on your current computer system, you will eventually have to either rule them out or factor in the cost of upgrading your system. But first, you need to determine what features and benefits you really need your day care accounting software to provide.

Ease of use is an important benefit. Unless you are very computer savvy and have no other employees who will need to use it, you need your software to be extremely user-friendly and intuitive so that little or no training is necessary.

But there is often a trade-off of ease of use versus power and flexibility. You need the day care accounting software you pick to be as easy to use as possible while still being powerful and flexible enough to provide the general financial accounting capabilities you need as well as specialized features to fill the needs of a day care center.

Obviously you need your accounting software to provide financial accounting capabilities like:

- General ledger

- Balance sheets

- Profit and loss statements

- Billing

- Invoicing

- Accounts receivable

- Payroll

- Tax forms and reporting

You may also want your accounting software to provide extra features like:

- Automated billing

- Automated invoicing

- An online bill payment interface

- Instant receipts when payments are recorded

- Employee work schedules

But day care accounting software also needs to be flexible enough to deal with more complex billing. For example, your rates may vary depending on the days or hours a child is in day care, or you may have to split bills between two divorced parents.

Your software will need to maintain contact information and a comprehensive payment history for every client. You may also need to be able to provide families a detailed statement of their yearly childcare expenses for their taxes.

In addition, specialized day care accounting software may be able to provide extra features like tracking:

- Immunizations

- Attendance, with automated recording of check-in and check-out times

- Food programs

- Calendars of events

System requirements, features, and benefits are not the only consideration when picking the best day care accounting software, though.

You need to be fully aware of any possible licensing issues, software add-on or upgrade needs, and support details. These can all affect your initial or long-term cost.

You need to consider:

- How many client records can the software handle?

- Is there a limit on the number of clients per family?

- How often is the software upgraded?

- Do software upgrades cost extra?

- How long is technical support available for old versions if you do not upgrade?

- Will you need to purchase extra modules or add-ons to get the features you need?

- If you have more than one computer that will run the software, do you need additional licenses?

- Is any training necessary? If so, what will it cost to train your entire staff?

- Is there a charge for technical support?

- How do you contact technical support?

- What are the hours for technical support?

- Will the software provider do any necessary custom programming?

- What is the charge for custom programming?

- How do you get the software (disk, download, etc.)?

- Is there a free trial of the software available before you purchase it?

You should also research what others think of the day care accounting software you are considering. First, check if it is recommended, accredited, or certified by any accounting agencies or accountancy organizations. Next, go to your favorite search engine and enter the name of the software along with keywords such as:

- review

- problem

- bug

- complaint

Do not skip this, as it can save you from a potential disaster! Software always sounds great on the vendor’s site, but you need to know if there are many end user complaints.

No complaints? Great, but now you need to find out whether you can get a better price on the day care accounting software you have chosen.

Go back to your favorite search engine and again enter the name of the software or software vendor along with keywords such as:

- discount

- coupon

- coupon code

- special offer

- rebate

Now repeat the search with the same keywords with the term “site:” followed by the vendor’s domain name, like in this example:

discount site:www.example.com

You might be surprised how often you can save 20% or 25% on any online purchase with these two extra steps.

Purchasing day care accounting software is a major investment. Your decision, good or bad, may affect your business for years. Following the steps above, you should be able to pick the best day care accounting software to fulfill your needs. And you should be able to get it at the best price possible.

Mike Adams writes on a wide variety of business topics. You can read many more accounting articles in his popular article directory, ElectricText, in the accounting articles section.

Most accounting software package are used by non accountants often with little or no previous accounting knowledge. Bookkeeping is best in these circumstances reduced to making a list of sales and a list of purchases on preset excel spreadsheets. Each workbook is arranged as 12 monthly spreadsheets with preset columns and uses an entry code letter to analyse both sales and expenditure.

Cash and bank spreadsheets are included as optional extras for those businesses that require them with a built in automated bank reconciliation. The sheet designed to be completed by copying the figures from the bank statement into the bank spreadsheet and the bank reconciliation is achieved by entering the statement total which is automatically checked against the entries made.

Monthly profit and loss account can include a financial health check based upon an automated tax forecast to enable businesses to monitor their financial performance. By entering drawings the package then compares the net profit made with the likely tax liability plus the drawings.

Quarterly vat returns can be generated for vat registered business and should also suitable for non vat registered business. To produce a vat return clients simply go to the vat file and select the quarter end date from a drop down menu and the figures for the vat return are automatically generated.

The vat calculations can be disabled by non vat registered small businesses by simply changing the standard vat rate from 17.5 to zero making the accounting software suitable for both vat registered and non vat registered businesses.

The accounting package includes a stand alone sales invoice generator which requires invoices generated to be manually input into the sales sheet.

The fixed asset schedule is preset with the capital allowance tax rates to automatically calculate capital allowances when fixed assets are entered. Depreciation is automatically calculated with preset percentages that can be changed as required.

The excel templates in the small business bookkeeping software being arranged to automatically generate an excel copy of the self assessment tax return. The excel self assessment tax return being arranged in the same layout as the official inland revenue form with the same box numbers making it easy to copy the figures from one to the other for submission.

Self-employed accounting software based upon single entry of transactions does not produce a balance sheet which is an optional requirement for self employed and therefore not a problem for the vast majority of businesses. Self employed businesses should consider using a limited company accounts package if a balance sheet is required. A limited company accounts package would produce a balance sheet being based not on single entry but on double entry bookkeeping principles.

The small business accounting software is suitable for a single tax year, the latest being 2007-08 and does not cater for accounting periods other than April to April. There are benefits in anyone self employed adopting the standard April to April financial year as this avoids tax allowances from two separate years being a feature of the accounts.

When used by small businesses using the cash accounting system the bookkeeping entries to the sales and purchase sheets must be entered according to the dates money is paid or received rather than the dates invoices were issued. At the end of the financial year any invoices not yet entered require to be listed to adjust the final profit and loss account figures. This a major disadvantage if using the vat cash accounting scheme rather than the accounting software being reviewed.

The product has a stock control feature to monitor any stock losses. The small business accounting software contains a wages interface that fully integrates the with the payroll software when the payroll files are saved into the same folder as the accounting software files. Being written on excel spreadsheets all transactions are visible and capable of being changed by for example overwriting any errors as opposed to a database system that requires new transactions to be entered to reverse previous entries.

The sales and purchase spreadsheets include columns for entering CIS tax deductions and payments and the certificate numbers. The CIS tax being then automatically entered on the self assessment tax return.

As the small business accounting software is written on excel spreadsheets then it is essential that users have a version of excel from 1998 onwards installed to use the program. Accounting software written on excel spreadsheets also works fine with an Open Source spreadsheet package.

Essential requirements of accounting software for the self-employed should produce a set of accounts for the small business requiring no bookkeeping skills and no previous accounting experience with the desired end product of a fully automated self assessment tax return.

Terry Cartwright, a qualified accountant in the UK, designs both Accounting Software on excel spreadsheets and Payroll Software for small to medium sized business providing a complete accounting solution and also supplies Company Formation packages for new limited liability companies

This article examines the impact on taxpayers and appraisers as well as their advisors of the new Federal provisions of the Pension Protection Act. For appraisers performing valuations for federal tax purposes in accordance with the Pension Protection Act (PPA), signed into law in August 2006, stipulates new penalties and stiff sanctions if the appraisers or appraisals fail to meet the new qualifications.

The Backdrop

The Congress and IRS, to safeguard the U.S. tax system and force taxpayers to straighten up, have introduced new rules and restrictions that impact lawyers and accountants as well as taxpayers. The Pension Protection Act (PPA) of 2006 establishes severe penalties for unethical conduct on the part of accountants involved in federal tax information consultancy to private firms.

Previously, the government’s targets for tax abuse were various corporate transactions. But now it has trained its guns on the venerable charitable contribution deduction as well. The act attempts to prevent overvaluing the property given to charity to take advantage of the fair market value deduction. According to Section 170(f)(16)(B), Congress has invited the IRS to stop the deduction completely. In the middle of the gun battle are the appraisers who opine for the taxpayers about the values of property that they give to charity.

Qualified appraisers
PPA also requires that appraisals need to be prepared by qualified appraisers.1 A qualified appraiser is defined in the Act to mean a person who has earned an appraisal designation from a recognized professional organization or has met minimum education and experience requirements established by the Treasury Secretary through regulations. An appraiser will not be treated as a qualified appraiser unless the appraiser demonstrates verifiable education and experience for valuing the type of property subject to the appraisal. Also, the appraiser must not have been prohibited from practicing before the IRS at any time during a three-year period prior to the date of the appraisal.

To sum it up, it is now required that an appraiser valuing property for charitable deduction must be trained and experienced and a vague representation by the appraiser will no longer suffice.

Appraisal Impact on Charitable Contributions
PPA has led to an increase in mandatory requirements for appraisals and appraisers to meet Internal Revenue Code Section 170, which covers charitable requirements.

It is now required that all claimed deductions in excess of $5,000 must be accompanied by a “qualified appraisal.” The regulations have duly defined the terms “qualified appraisal” and “qualified appraiser.”

All appraisals to qualify must fully comply with Uniform Standards of Professional Appraisal Practice (USPAP). Those that do not fully comply but are “consistent with the substance and principles of USPAP also satisfy this requirement.

Qualified Appraiser:

According to the Act for a person to be a “qualified appraiser” must meet 5 requirements as laid down in the code. According to these requirements, an appraiser must:

1. Have earned an appraisal designation from a recognized professional appraiser organization
2. Demonstrate “verifiable education and experience” in valuing the type of property subject to the appraisal
3. Regularly performs appraisals for compensation
4. Not appear on the IRS’s disqualification list at anytime during the three years prior to the date of appraisal
5. Meet other requirements [to be] prescribed by Secretary

However there is an exception available to taxpayers when the appraiser fails to meet the Act’s rigorous requirements. The denial of the deduction is inapplicable “if it is shown that the failure to meet such requirements is due to reasonable cause and not to willful neglect.”

Further, Notice 2006-96 states that the designation must be “awarded on the basis of demonstrated competency in valuing the type of property for which the appraisal is performed.” Additionally, the Notice notes that alternative education and experience requirements are met if the appraiser has done each of the following:

1. Successfully completed college or professional level course work that is relevant to the property being valued.
2. Gained at least two years experience in the trade or business of buying, selling or valuing the type of property being valued.
3. Fully described his or her relevant education and experience in the appraisal.

Prevention is better than cure. By adhering to norms and being organized and cautious about the whole process would ensure that you have nothing to fear. Educating yourself about the new law and its implications will further minimize your chances of getting in the way of PPA radar and getting penalized heavily.

Mel Abraham CPA, CVA, ABV, ASA, CSP - author & Adjunct Professor (USD Law School. Further, for access to an audio presentation on IRS penalties and the Pension Protection Act visit http://www.valuationeducation.com/penalties.html. He can be reached at mel@melabraham.com.