Last time we shared that reporting all income is the first step in getting your small business tax ready. The second step in ensuring that your costs of goods are reported accurately.
How to Calculate Cost of Goods Sold
Cost of goods sold is where you take into consideration your inventory. Your tax preparer uses three numbers to compute cost of goods:
- Beginning year inventory
- Plus current year purchases
- Less end of the year inventory
You should take inventory of product and goods on hand at least once a year. Do this close to year-end at around the same time each year.
If you purchase any items for personal use, as give-a-ways, or samples keep track of these so the dollar total can be subtracted from the cost of goods and put into supplies or other appropriate areas. Also remember, that if these items when purchased did not include sales tax, to include the value of all items on your sales tax return in the use tax section.
Other areas included in this section of your financial statements are:
- Subcontract and employee labor used in the production process of items you sell
- Packaging costs used for items (i.e. containers and labeling used for items you produced)
After calculating all costs related to the items sold, subtract total from sale which will give you a gross profit. Gross Profit / Sales should be compared with your mark up. Gross profit shows how much you made on the sale, and gives you the amount left to distribute between your pocket and business expenses.
Do you have additional cost of goods or gross profit questions? Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.
In the next few weeks will be focusing on getting your small business tax ready. We will provide professional tips to help small business owners prepare to file their 2012 taxes.
The first step in preparing your businesses taxes is to report all of your earned income.
Reporting All Income:
All money received for sales need to be deposited into your business checking account. Deposit totals for the month should equal monthly sales. If you make a deposit that isn’t sales, keep the slip and other paperwork showing what the deposit was; in an audit this will be needed to show why deposits don’t equal sales. This also applies to any deposits you make into your personal account. If the deposit isn’t going to be reported as income on your tax return you may want to document where the money came from and file with your tax return.
1099s received show income for services provided to your business customers that total $600 or more. Compare each 1099 to your recorded sales to each customer to verify the total. This is becoming more important as it shows whether all sales have been reported properly.
Issue with 1099s:
- If you receive credit card payments as well as cash/check payments, carefully review the 1099 Misc for total cash payments received for service.
- Since 1099Ks will show all sales paid for by credit card, you don’t want these payments included on the 1099 Misc or you will have double the sales reported to the IRS.
Your total sales should be higher than the total reported on 1099s. The only way sales should equal 1099 reporting is if – you only do business with other businesses and you never bill for less than $600.
Do you have additional questions about getting your small business tax ready? Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.
Customize QuickBooks with these simple changes.
QuickBooks View
Have you setup your QuickBooks icon bar or does it still have the numerous QuickBooks elements pictured? You will find customizing your icon bar under the heading View. With this tool you can take off the icons you won’t use and add items you will use. For example:
- Add write checks, enter vendor bills, and make customer invoices. – saves time with only one click to open.
- Add calculator, use register and find – keeps these useful tools available at all times.
- Add backup – a great way to remember to backup your data any time you do any major transaction entry or payroll so you don’t lose your information. Back up your data on a USB flash drive and take with you.
Another Open Windows List
- This is handy if you are like me and have numerous items open at all times
- The open windows list is a side bar that does just that – it lists what items are open so you can find what you want without closing or minimizing all the windows
Additional QuickBooks Questions
Do you have additional questions regarding QuickBooks? Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.
Customize QuickBooks with this simple change relating to 1099s.
1099s in QuickBooks
Companies that provide services to your company may require 1099s at year end. Preferences is where you need to turn this on and setup the accounts that you want checked for preparation of the 1099s.
Some of the accounts most often used for 1099 companies are:
- Rent, storage rental, equipment rental for Box # 1
- Professional fees including legal, subcontractors, repairs/maintenance, website design for Box #7
Don’t forget the W9 form you need to have on file for each service provider. Get the form here http://www.irs.gov/pub/irs-pdf/fw9.pdf and see my blog on W-9s at http://eauclairebookkeeping.com/2012/10/01/form-w-9/
Additional QuickBooks Questions
Do you have additional questions regarding QuickBooks? Contact me at (715) 379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.
Customize QuickBooks with these simple changes.
QuickBooks General Tab
- If you are a tab person, that’s great. But if you are continually hitting enter instead, like me, on the general tab you will find a check box for pressing enter to move between fields. The only drawback is you need to use the F keys or mouse to save transactions.
- Annoyed by the noise? The general tab turns on and off the beeps.
- Opening the drop down lists when you start typing, for quicker choices in name and account areas.
QuickBooks Reports
Did you know you can get reports in both accrual and cash? Preference setup gives you opportunity to choose which type you want most often. You can also choose to have the reports update automatically after any transaction changes. Both of these features are under Reports & Graphs.
QuickBooks Email Options
You can email different forms out to your clients from Quickbooks either through their site or through you Outlook email. Under Send Forms you can customize your cover letter.
Some example emails are those that go to customers, vendor purchase orders, reports to your tax professional or bank, or payroll. Carefully setup what information to display on pay stubs if you choose to email pay stubs to employees for obvious reasons. Sensitive items like social security numbers, addresses, etc. can be suppressed from the forms.
Additional QuickBooks Questions
Do you have additional questions regarding QuickBooks? Contact me at 715-379-0116 or email me at carlilesos@yahoo.com. You can also connect with me on Facebook or LinkedIn.
