Transaction Knowledge Bookkeeping Question

by Maria
(Norcross)

Transaction Knowledge Bookkeeping Question

Transaction Knowledge Bookkeeping Question

One of the providers in a practice asks for a report of yesterday's transactions. How would this report be created?

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Aug 24, 2023
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starstarstarstarstar 		Bookkeeping Transaction Report
by: BB

Creating a report of yesterday's transactions depends on the accounting or practice management software you are using. Here's a general guideline to create such a report, and you may need to tailor the steps based on the specific system in use:

Access the Reporting Module: Most accounting or practice management software will have a reporting section where you can generate various types of reports.

Choose the Transaction Report: Look for a report that includes transactions, such as a daily transaction report, sales report, or ledger report, depending on what information you want to include.

Set the Date Range: You will typically have an option to customize the date range for the report. Set the start and end dates to yesterday's date.

Filter as Needed: Depending on what the provider needs, you may want to apply additional filters, such as specific providers, transaction types, or other criteria.

Generate the Report: Once you've selected the necessary options, you can typically click a button to generate the report. This might be labeled "Run Report," "Generate," or something similar.

Export or Print: Most systems will allow you to export the report to a file (such as PDF, Excel, or CSV) or print it directly.

Verify Information: Ensure that the report includes all the relevant details from yesterday's transactions.

Note: The exact steps will vary based on the software you are using. Consult the user manual or online help resources specific to your system for precise instructions.

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Consignment Transactions

Our Non-Profit Society sells items on consignment. We do not purchase the items. Upon the sale of the items, we keep 25% and the consignee gets 75% at the beginning of each month. I am having a terrible time trying to find the actual Dr and Cr postings. Thank you.

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Aug 24, 2023
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starstarstarstarstar 		Consignment Liability
by: BB

Here's how you can handle the accounting for consignment sales in your non-profit society. Since you're selling items on consignment, you do not own the inventory, and you'll need to record transactions accordingly.

When the Sale Happens:

Debit (Dr) Accounts Receivable: for the total sales price.
Credit (Cr) Consignment Liability: for 75% of the sale, which is payable to the consignee.
Credit (Cr) Sales Revenue: for 25% of the sale, representing your share.
When You Receive Payment from the Customer:

Debit (Dr) Bank or Cash: for the total sales price.
Credit (Cr) Accounts Receivable: for the total sales price.
When You Pay the Consignee:

Debit (Dr) Consignment Liability: for the amount payable to the consignee.
Credit (Cr) Bank or Cash: for the amount payable to the consignee.
Here's an example of how this might look if you sell an item for $100:

Upon Sale:

Dr Accounts Receivable: $100
Cr Consignment Liability: $75
Cr Sales Revenue: $25
Upon Receiving Payment:

Dr Bank: $100
Cr Accounts Receivable: $100
Upon Paying the Consignee:

Dr Consignment Liability: $75
Cr Bank: $75

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Dual Affect of a Transaction

by Freeda
(New York)

What's the dual effect of a transaction if the element is no longer existent (ex. supplies get ruined)?

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Aug 24, 2023
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starstarstarstarstar 		Transaction Dual Effect
by: BB

When an asset, such as supplies, gets ruined or is no longer usable, you'll typically need to write off its value. The dual effect of this transaction in accounting would generally involve a debit to an expense account (e.g., Loss on Supplies or Supplies Expense) and a credit to the asset account (e.g., Supplies).

Here's how you might record the transaction:

Debit (Dr) Loss on Supplies (or Supplies Expense): for the value of the ruined supplies.

Credit (Cr) Supplies: for the value of the ruined supplies.

This transaction recognizes that the supplies' value has been lost and ensures that the balance sheet accurately reflects the assets' reduced value.

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How to Post a Transaction

I have a small S-Corp and I invested money in another corporation. How do I record the transaction in my S-Corp books?

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Aug 25, 2023
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starstarstarstarstar 		Small SCorp Transactions
by: BB

When an S-Corp invests money in another corporation, you would typically record the investment as an asset on the S-Corp's balance sheet.

Here's how you might make the entry:

Debit (increase) an investment asset account for the amount of the investment.
Credit (decrease) the bank or cash account for the same amount.
This entry reflects that the S-Corp has used cash to acquire an investment in another corporation.

Example:

Debit: Investment in XYZ Corp - $10,000
Credit: Bank Account - $10,000

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Intercompany Transactions

by Rose
(Conn.)

I really, really hope you can answer my question. Below are the steps our new software company uses to handled Inter-co sales.

My question is on steps #3 and #5
which company should claim the sale, company 1 that is mailing the invoice to the customer and receiving the payment, or company 2 that is selling to company 1?

Or should we be using inter-sale account as below:
Interco sales instead of regular sales for # 3 and Interco sales instead of cost of sales on step # 5 (see t-accounts attached)

more important question - should all intercompany accounts, when consolidated, = -0- one company with a credit balance and the other with a debit that when added together = 0?

shared- internal = company 2
1 Co 2 makes a purchase from outside vendor- DR WIP / CR AP
2 Co 2 pays the outside vendor - DR AP / CR Cash
3 Co. 2 sells to Co. 1- CR Sales / DR AR DR Cost / CR WIP

Owner- external = company 1
4 Co 1 records invoice from Co 2 - DR WIP / CR AP
5 Co 1 records sale to outside customer- CR Sales / DR AR - DR Interco Exp Cost of Sales / CR WIP
6 Co 1 receives payment from customer - DR Cash/ CR AR
7 Co 1 receives payment from customer - system generated trans. DR AP / CR Inter-co Due to/from
8 Co 2 to clear AR - system generated trans. DR bank (linked to Due to/from) / CR AR

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Aug 25, 2023
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starstarstarstarstar 		Intercompany Account Transactions
by: BB

The situation you described involves transactions between two affiliated companies (intercompany transactions), and it requires a special treatment in accounting to present an accurate and fair view of the overall financial position when consolidating financial statements.

Here's an analysis of your situation:

Company 2 should recognize the sale when it sells to Company 1 (Step #3), and Company 1 should recognize the sale when it sells to the outside customer (Step #5). Both transactions are legitimate and need to be recorded in the respective company books.

For consolidation purposes, intercompany transactions (including sales, cost of sales, and other accounts) should indeed eliminate to zero. This is to prevent double counting of transactions within the same consolidated group.

So, yes, you should use intercompany accounts to record these transactions, and when consolidating, you would make eliminating entries to ensure that the sum of the intercompany accounts equals zero.

Here's how it might look with intercompany accounts:

Company 2
3. CR Interco Sales / DR AR DR Cost / CR WIP

Company 1
5. CR Sales / DR AR - DR Interco Exp Cost of Sales / CR WIP

When you consolidate, you would create an entry that offsets the Interco Sales and Interco Exp Cost of Sales so that they net to zero.

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Making January Transactions Show In December

by Kathy
(Chesterton, IN USA)

I paid out some expenses in late December that should be included in the books for 2022 but the checks did not clear the bank until January 2023.

Therefore, when I reconciled the December statement they were not included. How do I make them show up in my last fiscal year for tax purposes?

Both of these expenses are for companies that I have already issued a 1099 for income earned in 2022. Thanks, Kathy E.

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Aug 25, 2023
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starstarstarstarstar 		Accrual Basis Transactions
by: BB

The issue you're describing pertains to the difference between the cash basis and accrual basis of accounting. In the cash basis method, expenses are recorded when they are paid, whereas in the accrual basis method, expenses are recorded when they are incurred, regardless of when they are paid.

In this particular situation, you'll want to make sure the expenses are recognized in the period in which they were incurred. Here's how to handle this situation:

Record the Expenses in 2022: If you are following the accrual basis of accounting, you should record the expenses in the 2022 fiscal year, as that's when they were incurred. You would debit the relevant expense account and credit accounts payable or the relevant bank account.

Adjusting Entry for Reconciliation: Since the checks didn't clear until January 2023, you may need to make an adjusting entry to reflect this in your reconciliation. You might credit a "Clearing" or "Pending" account in December and then reverse that entry in January once the checks have cleared.

1099 Considerations: As long as the 1099 forms accurately reflect the income earned and expenses paid within the tax year, they should be fine.

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Transaction Effects

What would be the effect on the profit of an accounting period if an drawing of £100 was accounted for as an expense by mistake?

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Aug 25, 2023
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starstarstarstarstar 		Transactional Effects
by: BB

If a drawing of £100 was mistakenly accounted for as an expense, it would reduce the profit for the accounting period by £100. Drawings are an owner's withdrawal from the business for personal use and should be recorded in the owner's equity account, not as an expense. By incorrectly recording it as an expense, the profit is understated by that amount.

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