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Old 03-02-2009, 03:52 AM
 
Location: Brooklyn, New York
467 posts, read 1,655,633 times
Reputation: 166

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Hi! I am in the process of setting up to sell my photography prints, and I am needing to begin bookkeeping. I know some basic accounting, but I'm having a hard time figuring out how to account for a few things.

1. I will officially begin business in 2009. In 2008, I ordered some test prints from a lab that I will/have either thrown away, given away to family, or will give as extras with customer purchases.

2. Other supplies purchased in 2008. I need to account for both supplies that I use, and supplies that will never be used (dumb purchases.)

3. I just purchased a new camera and laptop, in addition to expenses and cash, I need to credit equiptment (asset), too, correct? and depreciate it monthly/yearly?

4. Mostly, I want to know how to account for things purchased in years past that may or may not go on this year's tax return. For example, I paid for a logo design in 2008. Then I decided that I didn't want to use that logo. How do I account for that?

Thanks. Also any links to some basic account websites would be great. I recently took a basic accounting course and am already forgetting it, but I still have the textbook so I may need to revisit it.
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Old 03-02-2009, 09:24 AM
 
Location: Virginia Beach, VA
5,517 posts, read 8,773,929 times
Reputation: 2530
Quote:
Originally Posted by canyontothesky View Post
Hi! I am in the process of setting up to sell my photography prints, and I am needing to begin bookkeeping. I know some basic accounting, but I'm having a hard time figuring out how to account for a few things.

1. I will officially begin business in 2009. In 2008, I ordered some test prints from a lab that I will/have either thrown away, given away to family, or will give as extras with customer purchases.

2. Other supplies purchased in 2008. I need to account for both supplies that I use, and supplies that will never be used (dumb purchases.)

3. I just purchased a new camera and laptop, in addition to expenses and cash, I need to credit equiptment (asset), too, correct? and depreciate it monthly/yearly?

4. Mostly, I want to know how to account for things purchased in years past that may or may not go on this year's tax return. For example, I paid for a logo design in 2008. Then I decided that I didn't want to use that logo. How do I account for that?

Thanks. Also any links to some basic account websites would be great. I recently took a basic accounting course and am already forgetting it, but I still have the textbook so I may need to revisit it.

1. These are expenses. You can account for the freebies as COGS (if included with purchase), or you can expense them as promotional items.

2. Depends on what the supplies are. If they are for resale, they are inventory (asset), if they are for consumption, they are an expense.

3. Depends on who you are showing your financials to. In reality, these only need to be correctly depreciated on a yearly basis for tax purposes. However, they technically should be depreciated on a monthly basis.

4. Once you buy something, you cannot just "decide" not to use it randomly, and get some credit. A logo could possibly be an intangible asset in some cases, but its likely going to simply be an expense. There is no special "accounting" if you have it on the books and decide not to use it. You can "scrap" or "dump" assets, but in reality, that is just shifting an asset to expense.


I would highly recommend hiring a professional. One of the biggest reasons for business failure are unqualified tradesmen trying to handle finance,accounting and tax items by themselves to save a buck.
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Old 03-02-2009, 02:01 PM
 
Location: Brooklyn, New York
467 posts, read 1,655,633 times
Reputation: 166
Thanks for the advice!

I do plan to have my taxes done, or at least looked at, professionally. I'm going to use QuickBooks. Most small businesses have to at least do their own bookkeeping. I'm in a situation where the business is created not as a money making operation, but for the pleasure of it, so I don't right now have the same kinds of stakes another business would where they fold if they can't turn profit or make a huge error in accounting.

I do wish there were somewhere online that I could reference in situations like this where I just don't know how to account for something. In the end, it's not a huge deal if I have no investors or other users, but I do want to do it correctly, especially for taxes.

Another question, if anyone minds:
Let's say I charge $28 for a print. Someone buys it, with shipping, for a total of $32, and they pay PayPal. I don't remember (its been a while) if PayPal takes a percentage of each transaction as they come in or if they charge you a lump sum after the month is over. If they do it that way, I would DR cash for $32, CR income (whatever it may be called). Then at the end of the month, when I calculate out various fees, I would CR cash, DR sales tax expense, PayPal expense, shipping expense, etc? So long as its all taken at the end of the month, but what if PayPal, or anyother fee along the way, does it instantly, how is that accounted for? Perhaps the same way...

See. I really need somewhere (I guess you could say to me, hire someone you could call up with these questions, but is that appropriate?) I can go to reference this stuff, even a dedicated accounting forum somewhere on the net.
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Old 03-02-2009, 02:32 PM
 
593 posts, read 1,649,124 times
Reputation: 767
Quote:
Originally Posted by Randomdude View Post
1. These are expenses. You can account for the freebies as COGS (if included with purchase), or you can expense them as promotional items.

I would highly recommend hiring a professional. One of the biggest reasons for business failure are unqualified tradesmen trying to handle finance,accounting and tax items by themselves to save a buck.

I have run my own small business from my home for the last 10 years. On year one I found myself a really really good accountant that I paid for year round advice and direction. I can't say it enough that although coming to these forums is some good general information it should not take place of finding a good tax guy who understands your business so that they can direct you year round well.

IMO the first item to "buy" is a good accountant, mine has saved me thousands of dollars in potential poor business choices.
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Old 03-02-2009, 02:43 PM
 
Location: Brooklyn, New York
467 posts, read 1,655,633 times
Reputation: 166
Quote:
Originally Posted by kwalk65 View Post
I have run my own small business from my home for the last 10 years. On year one I found myself a really really good accountant that I paid for year round advice and direction. I can't say it enough that although coming to these forums is some good general information it should not take place of finding a good tax guy who understands your business so that they can direct you year round well.

IMO the first item to "buy" is a good accountant, mine has saved me thousands of dollars in potential poor business choices.
This is good advice. Do you mind me asking how much you pay him for your year-round service? How did you go about finding him? My family has an accountant that everyone uses, and he said his tax fee starts at $500. Is that expensive? I could call him up and ask him if I can do the year-round like you've done. I just hope he won't kill me when every day for the next month or two until I get comfortable I call him saying, 'how do I account for this?' Ha. Do you think he'll mind?
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Old 03-02-2009, 02:58 PM
 
Location: Virginia Beach, VA
5,517 posts, read 8,773,929 times
Reputation: 2530
Quote:
Originally Posted by canyontothesky View Post
Thanks for the advice!

I do plan to have my taxes done, or at least looked at, professionally. I'm going to use QuickBooks. Most small businesses have to at least do their own bookkeeping. I'm in a situation where the business is created not as a money making operation, but for the pleasure of it, so I don't right now have the same kinds of stakes another business would where they fold if they can't turn profit or make a huge error in accounting.

I do wish there were somewhere online that I could reference in situations like this where I just don't know how to account for something. In the end, it's not a huge deal if I have no investors or other users, but I do want to do it correctly, especially for taxes.

Another question, if anyone minds:
Let's say I charge $28 for a print. Someone buys it, with shipping, for a total of $32, and they pay PayPal. I don't remember (its been a while) if PayPal takes a percentage of each transaction as they come in or if they charge you a lump sum after the month is over. If they do it that way, I would DR cash for $32, CR income (whatever it may be called). Then at the end of the month, when I calculate out various fees, I would CR cash, DR sales tax expense, PayPal expense, shipping expense, etc? So long as its all taken at the end of the month, but what if PayPal, or anyother fee along the way, does it instantly, how is that accounted for? Perhaps the same way...

See. I really need somewhere (I guess you could say to me, hire someone you could call up with these questions, but is that appropriate?) I can go to reference this stuff, even a dedicated accounting forum somewhere on the net.

To answer your question, the proper accounting for a sale with a fee is this (ignoring sales tax payable, which becomes a factor when you collect sales tax as part of the price of the unit.)

debit cash, credit revenue, debit cogs, credit inventory, and when the fee invoice is given to you, credit cash, debit fee expense.

If it is given to you simutaneously (invoiced as part of the sale immediatley), then you debit cash and the fee expense, and credit revenue for the same amount (which should be the sale price of your object). Essentially, its just combining the second entry you would have made with the first for this transaction.

A good source I found at one point in my career as an accountant is www.accountingcoach.com. It is free, and does do a pretty good job explaining the most basic concepts of accounting.
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Old 03-02-2009, 03:02 PM
 
Location: Virginia Beach, VA
5,517 posts, read 8,773,929 times
Reputation: 2530
Quote:
Originally Posted by canyontothesky View Post
This is good advice. Do you mind me asking how much you pay him for your year-round service? How did you go about finding him? My family has an accountant that everyone uses, and he said his tax fee starts at $500. Is that expensive? I could call him up and ask him if I can do the year-round like you've done. I just hope he won't kill me when every day for the next month or two until I get comfortable I call him saying, 'how do I account for this?' Ha. Do you think he'll mind?

Word of advice, "tax accountants" arent always the best source of advice for corporate accounting matters. In fact, many are not skilled in debits and credits at all, and are simply tax code rats. Not to say a good tax accountant doesnt know their debits and credits, but you have to be careful.
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Old 03-03-2009, 07:05 AM
 
593 posts, read 1,649,124 times
Reputation: 767
Quote:
Originally Posted by canyontothesky View Post
This is good advice. Do you mind me asking how much you pay him for your year-round service? How did you go about finding him? My family has an accountant that everyone uses, and he said his tax fee starts at $500. Is that expensive? I could call him up and ask him if I can do the year-round like you've done. I just hope he won't kill me when every day for the next month or two until I get comfortable I call him saying, 'how do I account for this?' Ha. Do you think he'll mind?

I pay around $500 for the year, which includes my yearly taxes, figuring out quarter taxes each year, and support help. He did my personal taxes and it was a comfortable fit to have him then do my business. Oddly, he is located in California where I lived up to 5 years ago - but he still does mine long distance since moving to North Carolina. If your family has an accountant that they all use and like call him up and ask him if he would be available to look at your books now and see if he is a good fit for you and that you can work with him. I would see if he would give you "support service" for the first year that will obviously be more time than in future years. A good accountant is worth it IMO.

Best of luck to you on your new business!!
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Old 03-04-2009, 03:29 PM
 
Location: Moon Over Palmettos
5,975 posts, read 17,161,886 times
Reputation: 4989
I echo the sentiments of the prior posters. Start talking with an accountant BEFORE you start the business. It prevents a lot of headaches later. My husband is one and it's less painful for everyone if he is present at the start up. He walks the client through even the state licensing portion, advises them as to which legal entity designation is best for them (single prop, partnership, if applicable, C-corp or S-corp). Businesses vary on treatment of expenses and assets so there is no one answer on what is best for you. He continues to service the b/k needs of his clients out of state even after our move, but setting up remotely is quite difficult.
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