Selecting Online Accounting Services For Your Business

Posted on July 8, 2012 by admin

“Balanced budget requirements seem more likely to produce accounting ingenuity than genuinely balanced budgets.” Thomas Sowell

Financial resources precede the idea of initiating business. Ideas remain ideas until they are implemented. For the implementation of business decisions, the financial resources are to be allocated where needed. If a person does not have enough financial resources he cannot implement a plan or decision of a business. I think that explains the important of finance for a business. While initiating a new business following three need to be planned:

Budget and accounts planning
proper functioning
Scrutinizing and examining the function.

If these steps are not followed it can badly affect the sustenance of a company. A minor mistake can lead to complete failure. This is why proper planning is necessary for an accounting system. Manually handled records tell us that it there are a lot of expected errors. New businesses specially the ones that are on a small scale cannot afford to hire an accountant for managing the books of accounts. Even the accounting and tax consultants in the market are available to help but they charge quite high. Therefore people prefer to take the help of online accounting services that charge them low and they are more reliable as they offer an error free functioning and management of books of accounts. This is what an online accounting service can do for you:

Planning accounting resources in a way that output can be maximized.
It is an error free management of accounts.
It saves the time of the company that would be wasted in manual preparation of accounts.
It is a cost effective method of management of accounts.
It is a convenient way to assistance on functioning of accounts.
It is an easy way to monitor the flow of finances.
It gives you a 100% accuracy rate. This is not possible in manual handling of book of accounts.
It helps you in day to day accounting transaction.
It helps in strategic financial planning.
It is easily accessible.
It does not need and detailed technological knowledge.
It not only saves capital but also saves man power and time resources.
Online accounting services offer you a support round the clock.
Online accounting services help in filing for tax returns.
You can save a lot on tax preparation with the help of online tax accountants.
By the time, money and human resources that you save you can now increase your productivity.

Most of the small and medium sized businesses think that they can save a lot if they do it themselves but when it comes to legal and IRS filling they are not aware of the law. So they end up in paying more then they would pay to online accounting services – hiring an accountant is not cost effective for these businesses; specially the ones who are new in the market. As they can’t and won’t spend an extra penny they have. They should initiate the business in a properly planed way to get desired result. For this purpose we have already discussed the importance of planning financial resources and no one can do it better then a qualified, experienced professional.

Accounting Forms Meaning And Essence

Posted on March 14, 2012 by admin

Accounting forms are a combination of several accounting records of various business transactions. Proper accounting system is extremely important for any business organization whether it’s large corporate or small partnership. Accounting includes certain forms like Journal, ledger accounts, trial balance, spreadsheet records and records of various expenses and balance sheet. Actual financial condition of any business is shown with details provided by these accounting forms. Accounting forms are required to keep accounting system error free. It is very important for a businessman to know the actual net profit and financial condition of the business and this is only possible if accounting forms are accurate.

Types of the Accounting forms

These accounting forms contain detailed record of various financial activities. It contains details of all the transactions done in a financial year. Following are some accounting forms:

Cash Log Form: Keeping accurate record of the cash is most important for any business organization. These forms are kept to know the amount of cash received and paid. Since cash is required for every financial activity, cash log forms are very useful.
Journal Forms: Journal statements are prepared in order to know the relative details of financial transactions. These are known as journal forms.
Business Invoice Forms: Another kind of accounting form is business invoice form. These forms are given to almost every party a business deal with. Let it be customers, vendors, creditor even debtors.
Purchase and Sales order forms: This is a special kind of accounting form, prepared to track down the details of purchase orders made by the business to other parties. Whereas sales order forms are required to keep the records of sales made by the business. These forms are important since it is the basis of business. Business is all about purchase and sales.

Conclusion of Accounting Forms

Some large organizations where quantity of inventory used is huge maintain inventory turnover ratio forms. These forms are helpful to know the exact cost of inventory. Ever since the invention of double entry system need of documentation has immerged and this leads to keeping records of accounting forms. Accounting forms are so vital for any business organization. Accurate accounting forms are the proof of true financial condition of business. After the industrial development with the ever increasing size of business crossing the boundaries of countries keeping record of every aspect has become a necessity and accounting forms let the businessman track accurate details of financial condition.

Accounting for Construction Contracts

Posted on October 10, 2011 by admin

A contract is a big job requiring considerable length of time to complete and comprising activities to be done outside the factory promises, viz. construction of a dam or school building, laying down railway lines, etc. Special cost and financial accounting is required to maintain the records of construction contracts. Since each contract involves considerable resources both in terms of men and materials, it is necessary to devise an appropriate accounting system to ascertain the cost and profit made on each contract separately.

Profit on incomplete contracts: At the end of an accounting period it may be found that certain contract have been completed while others are still in process and will be completed in the coming years. The total profits made on completed contract say be safely taken to the credit of the profit and loss account. But the same cannot be done in case of incomplete contracts. These contracts are still in process, and there are possibilities of profits being turned into to losses on account of heavy rise in prices of materials and labor and losses on account of other unforeseen contingencies. At the same time it does not also seem desire able to consider the profits only on completed contracts and ignore completely incomplete ones because this may result in heavy fluctuations in the figure of profit from year to year. A year in which a large number of contracts have been completed will show an abnormal high figure for profit while reserve may be the case in the year in which a large number of contracts remain incomplete. Therefore, profits on incomplete contracts should be considered, of course, after providing adequate sums for meeting unknown contingencies.

There are no hard and fast rules for the calculation of the figures for profit to be taken to the credit of profit and loss account. However, the following rules may be followed:

(a) Profit should be considered in respect of work certified only, work uncertified should always be valued at cost.

(b) No profit should be taken into consideration if the amount of work certified is less than 1/4 of the contract price because in such cases it is not possible to foresee the future clearly.

(c) If the amount of work certified is 1/4 or more but less than1/2 of the contract price, 1/3 of the profit disclosed, as reduced but the percentage of cash received from the contractee, should be taken to the profit and loss account. The balance should be allowed to remain as a reserve.

(d) If the amount of work certified is very much near completion, if possible the total cost of completing the contract should be estimated The estimated total profit on the contract then can be calculated by deducting the total estimated cost from the contract price. The profit and loss should be credited with that proportion of total estimated profit on cash basis, which the work certified bears to the total contract price.

(f) The whole of loss, if any, should be transferred to the profit and loss account.

Cost Plus Contracts: In certain contracts the contractee agrees to pay to the contractor the cost price (usually prime cost) of the work done on the contract plus an agreed percentage thereof by way of overhead expenses and profit. Such contracts are known as cost-plus contracts. The system of cost plus contract costing is employed in cases where it is very difficult for the contractor to quote the contract price because there has been no precedent which he may take as basis. It is also employed where the work to be done is not fixed at the time of placing order for the contract. The method is generally used where government happens to be the contractee. The method suffers from the following disadvantages:

There is no incentive to the contractor to eliminate waste and economies the cost of completing the contract. On the other hand, he is tempted to increase the cost because greater the cost, the greater will be his share of profit. In case of this system the amount of overheads recovered and profit made depends upon the value of materials used, which is subject to considerable price fluctuations. The agreed fixed percentage may, therefore, prove to be either too excessive or too low for covering overheads and profit.

Escalation Clause: Escalation clause is usually provided in the contract as a safeguard against any likely changes in the prices of utilization of material and labor. The clause provides that in case prices of items of raw materials, labor, etc. specified in the contract, change during the execution of the contract, beyond a specified limit over the price prevailing at the time of signing the agreement, the contract price will be suitably adjusted. The term of the contract specify the procedure for calculating such adjustment in order to avoid all future disputes. Thus, such a clause safeguards the interests of both the contractor and contractee in case of fluctuations in the price of materials and labor, etc.

Work in Progress: At the end of the accounting period a contract may still be in progress. The term work in progress refers to the work done so for in respect of the contract, which is still incomplete. It consists of the following:

(1) Working Certified: It refers to the work approved by the contractee. In case of contracts it is the useful practice for the contractor to get the work approved from time to time from the contractee. This is helpful to the contractor in two ways; first in case the contractee finds the work not up to specifications, he may ask the contractor to take corrective actions in time. Second, in contract accounts it is useful practice to have a system of progress payments, i.e., the contractee agrees to pay a certain percentage of the work certified (say, 80 or 90 percent). This is advantageous to the contractor since he gets immediate liquid funds.

(2) Work Uncertified: It refers to the work which has been done by the contractor but not so far approved by the contractee.

Work certified generally includes some profit element also while work uncertified is always valued at cost to the contractor.

Sub Contracts: The contractor may entrust some portion of the work to be done under the contract to a sub-contractor. Usually work of a specialized nature, i.e., steel work, special flooring, etc., is done by sub-contractors, who are responsible to the main contractor. The cost of such sub-contracts is a direct charge against the contract for which the work has been done.

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Tag Archives: Accounting System

Selecting Online Accounting Services For Your Business

Accounting Forms Meaning And Essence

Accounting for Construction Contracts