Accounts Payable

If you are an accrual basis taxpayer or need accounts payable listed on your financial statements for your bank, you must provide us with a list of your accounts payable at the end of each month.

If you use QuickBooks or other software, you must track accounts payable within the vendor section of your software so that it can be properly accounted for.

Expense Reports

Expense reports are used to account for and record business expenses paid personally. This would include business expenses paid by personal cash, from personal checkbook, or by personal credit card. List the items by category on the Expense Report and write a company check to yourself.

Vehicle Expenses

If your corporation owns the vehicle that you drive, then the corporation should pay all expenses on the vehicle, including gas, oil, repairs, insurance, etc. You will need to report your mileage information to us by November 30th of each year. This includes miles driven for personal, commuting and business use. Any personal or commuting use will be included in your year-end W-2.

If you own the vehicle, then the corporation should not pay any of the expenses. All loan payments, gas, oil, etc., should be paid from your personal funds. The number of business miles driven should be listed on your expense report and reimbursed at the standard mileage rate.

Vehicle expenses are "hot" items during audits, so be sure you have written evidence supporting your business and personal mileage. Without this written proof, you could lose your entire deduction for vehicle expenses.

Asset Purchases

Items purchased that have over one year of useful life and are over $1,000 in value are typically considered depreciable assets. This includes such purchases as furniture, computers, equipment, vehicles, and leasehold improvements. When you purchase anything that falls under this description, you will need to provide us with a copy of the receipt for the item as well as any lease or finance agreement associated with it. Invoices for assets being depreciated should be kept in a separate file. This file is required to be maintained for audit purposes.

When you dispose of or sell any asset, please notify us so we can update our records. Additionally, at the end of each year, we will ask that you verify all assets we have listed for your business are still in use. Please be sure to respond promptly to our request. Keeping this information up to date will save you money in personal property taxes and keep your business tax return accurate.

Petty Cash System

Begin the petty cash system by placing an appropriate amount of cash ($50, $100, $200, etc.) in an envelope (or cash box, drawer). When an expense needs to be paid, cash is taken from the envelope and a slip indicating who took the money is placed into the envelope. Any change and a copy of the receipt from the purchase are placed back in the envelope. Remove the original slip.

At all times the total of receipts, slips and cash should equal your designated petty cash amount.

When petty cash runs low, simply write a check for the total of all receipts. Cash the check and put the cash in the envelope. This should bring your cash back up to its designated level. Total each category of expenses as shown to the left and code the check accordingly. Staple the receipts and petty cash summary together, indicate the date and check number, and file it in paid bills.

Document Retention

Make sure that you have receipts for all expenditures related to your business. A cancelled check is not sufficient. Be prepared, in case of an audit, to explain the business reason for expenditures. For unusual items it is a good idea to make a notation on the invoice while the information is fresh in your mind.

Automobile expenses are "hot" items during audits so be certain that you have written evidence supporting your business and personal mileage. Please understand that without this written proof, you could lose your entire deduction for vehicle expenses.

Invoices covering items being depreciated should be kept in a separate file. You must be able to produce invoices as long as assets are being depreciated. Also, maintain your leases, bank loans and other permanent long-term legal documents in files easily accessible at all times. Regular invoice and receipt files, along with income records and reports, should be maintained in annual files. These annual files should be archived at year-end and new ones set up at the start of each New Year.

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