Accouting Question for you business owners out there

Discussion in 'Starting a Lawn Care Business' started by shelbymustang616, Jan 27, 2010.

  1. shelbymustang616

    shelbymustang616 LawnSite Member
    Posts: 117

    Here is my question to you guys. Lets say i have figured out my overhead costs like loan payments gas for equipment and wages set for my employees for what it costs me to run my business and i finsh a job for a customer, the customer hands me a check for the finshed job. Now within in this amount lets say $4000. How do I break this down into accounts? What i mean is do you guys have seperate accounts like a wages account, gas account, equipment account, capital, etc etc, or do you put everything in one account and just take out of that account when wages are paid, gas needs to be in the trucks, insurance is due, or you buy a new rake? Thanks guys :cool2:
     
  2. Raymond S.

    Raymond S. LawnSite Senior Member
    Posts: 979

    No separate accounts. It's a credit to cash. Expenses are a debit. (I don't mean cash cash, I mean cash as in bank account) You should get a basic software to help track expenses to help you at the end of the year so you can summarize reports. It should run parallel to your statement from the bank but broken into categories for tax purposes. It's a good idea to cross reference the two monthly just to make sure things are running according to plan. Atleast that's how I do it.
     
  3. jjarvis4

    jjarvis4 Banned
    Posts: 39

    According to accrual accounting principles, if I get paid for a service it will go into "cash account"(as a debit located under assets). When I buy say a piece of equipment, then I decrease (credit) cash account and increase (debit) my equipment account (also known as PPE) which is under assets. Expenses are documented under an expense account found under the Equity side of the accounting equation.
    This is all probably a little confusing! Like Raymond S. said, get something like quicken or quickbooks to help you track all of this. Also look up the "accounting equation" so you will understand what takes place in an accounting program.
     
  4. shelbymustang616

    shelbymustang616 LawnSite Member
    Posts: 117

    ok i figured that would be the easiest way of doing insted of making sepearte accounts and depositing a certain amount into each account.(Pain in the Ass) I was thinkin of getting Quick Book. Is this easy to use if you as in you already used it?
     
  5. shelbymustang616

    shelbymustang616 LawnSite Member
    Posts: 117

    I am new to the accounting this does make sense but still makes me want to scratch my head. I am graduating college this summer in business but currently learning the accruel accounting as we speak
     
  6. Stevegotcrabgrass

    Stevegotcrabgrass LawnSite Member
    Posts: 248

    What you are referring to is double entry book keeping. The larger you get the more it becomes necessary. The reason companies do it is to prepare a set of basic financial statements including an income statement, a balance sheet, a statement of cash flows and a statement of owners equity. In addition it is easier to locate and track items of revenue and expenses. A quick example:

    You may have revenue from cutting lawns and you may have received money from the sale of a capital asset, (i.e. a mower). You would account for them differently under GAAP (generally accepted accounting principles, a standard set for US companies). You would not include the sale of the mower as revenues. It would be included as a gain from a sale. This obviously is a very basic example. You also get into the area of differences between the accrual method of accounting (revenues are recognized when they are EARNED and not necessarily in the period in which the cash is received) and the tax method or Cash method.

    For a smaller company you will be operating on the cash basis of accounting which is an acceptable method under current IRS tax law. Since your revenues are small you report income when cash is received. Larger companies would use accrual accounting. I would still be aware of HOW the cash is received, be it through operations or sales not related to operations (i.e. selling your mower as you are NOT in the business of selling mowers). This may help you at tax time as your income MAY BE lower if you do not include the sale of a capital asset as revenue and it can be reported as a capital gain/loss depending on the depreciation taken on the machine.

    Advice for now. Keep detailed records of where the money is going to and coming from. Once you get the need for this type of book keeping it will be easy to start giving everything account numbers. The poster above is talking about debits and credits. This is called a journal entry. It is used to classify items of revenue, expenses and other transactions. You do NOT need to do this YET. The more simple your book keeping the better. Unless you need or want a CPA. If you want a CPA pm me....:)
     
  7. Stevegotcrabgrass

    Stevegotcrabgrass LawnSite Member
    Posts: 248

    Sorry, sometimes I ramble.
     
  8. Raymond S.

    Raymond S. LawnSite Senior Member
    Posts: 979

    Don't listen to me. I struggled through accounting in my business program and still get debits and credits confused, that's why I got a program...and an accountant. Know where it's going and coming from and when you get to the point where you need to generate cash flow statements, owner's equity statements, balance sheets, etc. you have an idea of what the accountant is telling you. Most entry level accounting courses prepare you to be able to interpret what your accountant tells you and make sure it's on par. Finance is much more interesting and important to me and if you are still in college that is where I'd spend more of my time after you get an understanding of basic accounting principles.
     
  9. Stevegotcrabgrass

    Stevegotcrabgrass LawnSite Member
    Posts: 248

    I agree, Intro accounting teaches you book keeping and to "get" what your CPA tells you. As far as finance and accounting there is a very grey area depending on you line of work (i.e. a foot doctor and a brain surgeon) I practice operation accounting and finance. I am not too much of a tax guy but more of a business/finance guy with some tax knowledge. If you want to succeed in any business I would recommend learning accounting, finance AND business managment or be real freakin good at what you do to be able to AFFORD a good accountant/business manager. Good luck. Any questions please feel free. And I also STILL get debit and credits confused.

    As the guy said above, if you get to the point when you NEED to generate financials, you will NEED an accountant anyway, or maybe an Accounting department even if it is a full charge book keeper. Good luck.
     
  10. SangerLawn

    SangerLawn LawnSite Senior Member
    from indiana
    Posts: 736

    I don’t know about all the technical stuff the other people are writing about and they probably have a better system then me but this is what I do.

    I run 3 accounts. Business, business savings (this is actually a checking account because of better intrest but i call it my savings account), and a personal account

    I have a main account that all checks get deposited into and all business bills get paid out of…this is my main account. Every Friday when I hand out payroll checks, I pay myself a check that gets deposited into my personal account. Then I write a second check that gets deposited into a savings account for the business. This check is normally around 10 percent of that weeks net income. This account continues to grow for times I need cash for the business…as in something major breaks.
     

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