Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes, bookkeeping, and accounting—giving you the tools you need to meet your short and long term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered! Our second to last post and the first installment of this ‘Bookkeeping Basics’ series introduced the concept of what bookkeeping is, what it's used for, why it’s important and how to begin. From the old “general ledgers,” which used red and black ink, to ultra-modern digital programs, understanding the basics of bookkeeping is an essential part of running any successful small business. As a precursor for accounting, bookkeeping provides an accurate basis for evaluating the health of your business and planning for financial growth. For these reasons, accurate bookkeeping is paramount. 
 
The first part of this series explained the difference between single-entry and double-entry bookkeeping methods. As well, we went through the various types of accounts (i.e. assets, liabilities, revenues, and expenses), as well as their underlying subtypes (e.x. accounts receivable, utilities expense, interest income, etc.). We gave you a few options as far as setting up your accounts (e.g. Excel spreadsheet vs. digital bookkeeping software) along with their corresponding pros and cons. We explained the difference between a debit (Dr) and a credit (Cr) and trust us, it’s not what you think. Finally, we gave a few best practices tips concerning bookkeeping to keep your books organized and accurate. Therefore, it’s in your best interest to read our first article (if you haven’t already) before delving into this second part!
 
In the second part of this series, we continued our exploration into the world of bookkeeping. We discussed balancing books, preparing financial reports, and a few more best bookkeeping practices. How do you know when you’ve reached the adjusted trial balance? What’s the equation for determining your books are balanced? What’s the difference between a P&L statement and a cash flow sheet? And, how often should you be setting aside time to bookkeep? We answer all of these questions and more in our last article. We highly encourage you to go check out Part II! 
 
Today, we come upon the final installment in our Bookkeeping Basics series. Our aim is to answer the most commonly asked bookkeeping questions. You should leave this series feeling confident in your understanding of bookkeeping principles and ready to pursue bookkeeping yourself (or invest in an experienced professional). If you reach the end of the article and still have questions, reach out to us! Now, without further ado, here’s Part III!
 
Is cash-basis accounting the same as single-entry bookkeeping?
 
Technically, yes. Cash-basis accounting includes recording a single entry for every transaction which includes the making or receiving of a payment. If you read Part I, you’ll recognize this definition as single-entry bookkeeping. This type of bookkeeping is preferable for small-scale businesses with straightforward transactions (i.e. I make the product and you buy the product). Double-entry bookkeeping, in a similar manner, also goes by the name accrual accounting. Accrual accounting includes recording two entries for every transaction even if the transaction does not include making or receiving a payment. This type of bookkeeping is preferable for larger, more complex businesses with multiple forms of transactions (i.e. I make various products and offer store credit and sell products from other businesses.) 
 
Is there a difference between bookkeeping and accounting? Do I need to hire a bookkeeper in addition to an accountant? 
 
There is certainly a difference between accounting and bookkeeping—and a distinct difference at that. Bookkeepers manage the ever-evolving ledgers of their clients. As transactions accrue, further data must be integrated into the bookkeeping system. Bookkeepers must categorize revenue and expenses, generate financial statements, reconcile discrepancies and continuously review the ledger for accuracy. A bookkeeper’s job is never done, and accounting is actually an extension of bookkeeping. Accountants use the financial data and statements generated by bookkeepers to prepare income tax returns and give tax planning advice. This doesn’t mean an accountant and a bookkeeper cannot be the same person. Many small businesses operate with a single individual fulfilling both positions. However, the obligations of each should not be conflated and, should you choose to outsource, you may have to hire both an accountant and a bookkeeper. 
 
(Keep in mind: Hoods Tax & Accounting offers both bookkeeping and accounting services!)
 
I’m still confused about the difference between debits and credits. How do I know which to put in my books? 
 
Simply put, debits and credits are inversely related. This means each debit corresponds to an equal credit and vice versa. In this way, the books remain balanced. Which means you’ll always put both. Remember: the equation which dictates a balanced ledger is Liabilities + Equity = Assets. Which means if any aspect of this equation changes, the other aspects must change as a result. As a rule of thumb, debits increase asset and expense accounts, while decreasing liability, equity, and revenue accounts. While credits increase liability, equity, and revenue accounts, while decreasing asset and expense accounts. Notice how they mirror each other? 
 
What’s the difference between accounts payable and account receivable? 
 
This distinction will only apply if you use a double-entry, or accrual, bookkeeping system. Accounts payable is, as the name suggests, money which needs to be paid. Or, in other words, a liability. This might be an expense purchased on business credit, which will need to be paid off later (and potentially with interest). Accounts receivable, therefore, is money which needs to be paid to your business. Or, in other words, an asset. This might be a customer purchase made on credit, which they will need to pay off later (and potentially with interest). Both accounts payable and accounts receivable are accounts which you can and should record transactions within. 
 
Why should I invest in a professional bookkeeper? Isn’t it cheaper to simply do the bookkeeping myself? 
 
Do you remember eighth grade math? Do you remember “showing your work,” going through all of the right steps, and still arriving at the wrong answer? Bookkeeping can be a bit like eighth grade math sometimes. The purpose of these articles has been to show you bookkeeping isn’t as complicated as it may initially seem, but that doesn’t mean bookkeeping is easy. Minor mistakes or even procrastination can lead to major confusion. Misplaced entries or inaccurate figures can leave you wondering where money went and wasting precious time trying to find it. No small business owner wants to realize they’ve been doing things wrong when payday comes or tax season rolls around. That’s why you should invest in a professional bookkeeper. Who knows? The investment may end up paying for itself in the long run. 
 
You can hire out to a dedicated bookkeeping and accounting firm (like Hoods) or hire an in-house bookkeeper for your business. If you’re certain you would like to bookkeep for yourself but are hesitant about making beginner mistakes, invest instead in a bookkeeping software. At Hoods, we have QuickBooks ProAdvisors who can train you how to use the software for your businesses bookkeeping needs. 
 
What’s the most common bookkeeping error?
 
There are so many… Primarily, failing to track receipts for minor purchases. We understand, these things can slip the mind, but due diligence ensures you’re able to receive the best return come tax season. More generally, business owners tend to take on too much regarding bookkeeping. As previously discussed, it’s better to avoid mistakes and invest in a professional than do things yourself and make grievous errors. Develop your bookkeeping skills over time by working closely with a professional and, when you feel ready, take on the responsibility. This way you cover your bases and save yourself trouble!
 
Thank you for coming along on this bookkeeping journey with us. Again, our aim was to illuminate the entire bookkeeping process and impress upon you the importance of accurate bookkeeping. Whether you’re off to do your own bookkeeping or investing in a professional, we wish you the best of luck! As always, we’re happy to be able to provide you with the most relevant, up-to-date tax information for you and your family. From savings plans to tax credits to business acumen, the Hoods Tax & Accounting blog is your one-stop shop for everything you need. We offer tax preparation, bookkeeping, payroll, and QuickBooks services. If you have any questions or are interested in a consultation, please reach out! We do offer virtual consultations over Zoom, as part of our effort to accommodate everyone in these trying times. We look forward to hearing from you! Until next time, thank you for reading! 

Hello, readers! Welcome back to the Hoods Tax & Accounting blog! We’re delighted to be able to share up-to-date information about taxes, savings, and financial literacy—giving you the tools you need to meet your short and long term goals. Whether you’re managing taxes for your small business or wondering how to take advantage of certain tax credits, we’ve got you covered! Our previous post and the first installment of this ‘Bookkeeping Basics’ series introduced the concept of what bookkeeping is, what it's used for, why it’s important and how to begin. From the old “general ledgers,” which used red and black ink, to ultra-modern digital programs, understanding the basics of bookkeeping is an essential part of running any successful small business. As a precursor for accounting, bookkeeping provides an accurate basis for evaluating the health of your business and planning for financial growth. For these reasons, accurate bookkeeping is paramount. 
 
The first part of this series explained the difference between single-entry and double-entry bookkeeping methods. As well, we went through the various types of accounts (i.e. assets, liabilities, revenues, and expenses), as well as their underlying subtypes (e.x. accounts receivable, utilities expense, interest income, etc.). We gave you a few options as far as setting up your accounts (e.g. Excel spreadsheet vs. digital bookkeeping software) along with their corresponding pros and cons. We explained the difference between a debit (Dr) and a credit (Cr) and trust us, it’s not what you think. Finally, we have a few best practices tips concerning bookkeeping to keep your books organized and accurate. Therefore, it’s in your best interest to read our last article (if you haven’t already) before delving into this second part! 
 
Today, we’ll continue our exploration into the world of bookkeeping. We’ll discuss balancing your books, preparing financial reports, then give you a few more best bookkeeping practices. When you’re alone at the computer with a bunch of receipts and numbers, figuring out how to make sense of everything can be overwhelming. Our aim is to showcase how simple bookkeeping can be when you understand the fundamentals. If you begin how you aim to finish, you should establish bookkeeping etiquette early on, as this will ensure later success. If you've been bookkeeping in a messy, roundabout way for years and fear how much effort an overhaul will require, take things one step at a time. We’ll be with you every step of the way!
 
Without further ado, let’s jump in!
 
Balancing the Books
 
This is a phrase many of us have heard thrown around throughout our lives, but what does “balancing the books” really mean? The best way to visualize balancing the books is to envision a scale. Not the scale you step on in the bathroom or the scale your doctor uses to weigh you. In this case, envision what’s called a double-pan balance scale. These types of scales allow you to weigh two things in relation to one another. When you place weights on both sides, the heavier of the two weights will sink lower. If the two weights are equal in mass, then both sides of the double-pan balance scale will appear level. Makes sense, right? 
 
In the same way, when you balance your books, the debits and credits recorded throughout a period (e.g. a quarter, a year) should “match” (which is to say they should correspond. In Part I we discussed the double-entry bookkeeping system. In this system, each transaction is recorded twice. First as a debit, or an increase. Secondly, as a credit, or decrease. For example, if Sally’s lawn company spent $3,000 on a new lawn mower, Sally would record a $3,000 debit in the left-hand side of the Equipment account. Then, Sally would record a $3,000 credit in the right-hand side of the Cash account. Both Equipment and Cash are considered asset accounts and, in this case, Sally has traded one type of asset for another type of asset. 
 
Now, these entries are akin to journal entries. They are a record of the transaction. When you balance your books, you are “posting” these entries into the general ledger in order to extrapolate the final account balances. While most bookkeeping programs will do this math for you (and point out errors in your entries at the time you make them), it’s still important you understand what’s being done. 
 
Continuing the example from earlier, Sally has redistributed her wealth between two different forms of assets in the aforementioned transaction. Thus, her Equipment account will reflect the debit, her Cash account will reflect the credit, but her overall Assets will not change because of this transaction. Now, conversely, if over the course of the month Sally not only purchased a new lawn mower but also needed to pay the firm which markets her services $2,000, the cash account balance and the overall assets would need to be adjusted down by $2,000. 
 
Once you’ve adjusted the balance of each account, you’ll have what’s called an adjusted trial balance. Assuming you’ve done everything right, when you add your company’s liabilities to your company’s equity, you’ll arrive at a figure which is equal to your company’s assets. In short:
 
Liabilities + Equity = Assets
 
Now, equity, if you’re unsure, is the value left over when liabilities are deducted from assets. (Psst! We covered equity in Part I.) This makes the equation, more accurately: 
 
Liabilities + (Assets - Liabilities) = Assets 
 
If you arrive at two different numbers, this indicates a discrepancy in your bookkeeping. You’ll need to comb back over your records, comparing debits and credits and making sure everything is indeed balanced. Once you’ve balanced the figures successfully, you’re ready to close the books and begin compiling financial statements!
 
Yay!
 
Preparing Financial Reports
 
This is one of the most exciting parts of bookkeeping, because this is the stage when conclusions can be drawn based off of the meticulous records you’ve kept. With these financial statements, you’ll be able to assess the health of your business and plan accordingly for future expansion or cutbacks. The three essential types of financial statements are: balance sheets, profit and loss “P&L” statements, and cash flow statements. We’ll provide you with a brief overview of each. 
 
Balance sheets are a snapshot of your books. They showcase the equation at work and include your current assets, liabilities, and equity. You’ll include the balances of your accounts here. When someone looks at your company’s balance sheet, they’ll be able to assess in only a moment the health of your company. Are you in the red? Or, do you have cash reserves which will facilitate expansion? 
 
Profit and loss statements, also referred to as income statements, report on revenues and expenses over a period of time. For example, a clothing company may have grossed $1.2 million in a quarter, but spent $600,000 on materials, shipping, and marketing in the same time span. Therefore, the company’s revenue was actually $800,000. By comparing multiple P&L statements, one can glean the growth (or decline) of a company. 
 
Finally, cash flow statements are a simpler version of a P&L. They focus solely on how much money the company is bringing in and sending out. By evaluating a cash flow statement, you can assess a company’s ability to pay its bills and remain afloat. 
 
Best Bookkeeping Practices
 
Sticking to a regular schedule is key to managing your books. Entering records of transactions can be tedious and time-consuming. Allowing too much time to pass between entries only makes the work unbearable when you finally do sit down. Choose a time every week, two weeks, or month, to input financial information (i.e. invoices, bill payments, revenue, etc.). Keep all of this information in one place and be sure to tackle bookkeeping when your mind is well-rested. Minor mistakes can turn into headaches later. 
 
If you’re unsure about handling the entirety of your company’s bookkeeping, there’s no shame in that! Many successful businesses outsource their bookkeeping needs, as this frees up time and mental energy. Just make sure you invest in a trusted professional to handle your bookkeeping! 
 
 
Thank you for reading the second part of the Bookkeeping Basics series! We hope we’ve demystified bookkeeping, at least a bit. Tune in for the third part of the series, where we’ll be answering commonly asked bookkeeping questions! As always, we’re happy to be able to provide you with the most relevant, up-to-date tax information for you and your family. From savings plans to tax credits to business acumen, the Hoods Tax & Accounting blog is your one-stop shop for everything you need. We offer tax preparation, bookkeeping, payroll, and QuickBooks services. If you have any questions or are interested in a consultation, please reach out! We do offer virtual consultations over Zoom, as part of our effort to accommodate everyone in these trying times. We look forward to hearing from you! Until next time, thank you for reading! 

Keeping a watchful eye on your finances is always important. During these uncertain times, it is more important than ever.

Keeping a close watch on your purse strings is a necessity. With so much unknown about this year, knowing exactly where your finances stand and how to keep them stable has become a huge priority for most Americans. Since March of this year, over 3 million Americans have filed for unemployment, according to Forbes. Juggling how this pandemic has affected your income and how it will affect your daily and monthly spending could become a huge focus for you and your family. While staying healthy and figuring out new school and work scheduled are our first priorities, it is easy to get overwhelmed with how to deal with these potentially drastic changes in your finances. How do you decide what to cut out? How can you change your spending? What are the necessities that can't be cut out, and how do you make these decisions with the best outcome for your family?

According to Forbes, an estimated 49% of the American population was living paycheck to paycheck even before the pandemic hit. This left no room for extra savings or a nest egg to fall back on. Unemployment has helped, but even that has seen a drastic change since its first wave with the national stimulus checks. Many people have been left without enough to cover their basic needs. The first stimulus check and the additional $600 from the government added to unemployment checks were just short term solutions. What can we do now to help make our bills, keep a roof over our heads, and keep food on the table?

THE NEW BUDGET
You sit down every month and track what you're earning and what you're spending. You create a solid budget based on your calculations that takes care of your bills, your family's needs, and hopefully goes towards a little fun. If your paycheck has been hit or changed due to the pandemic, your budget will have to be retooled. Try and figure out how much of a cut your salary has gone through and try and cut that much out of your monthly spending. Please remember that while you're cutting your budget, your retirement planning and savings still needs your attention. If you can keep paying into those, that is ideal. If you are unable to do so, don't panic. Instead of adding to them, try not touching them unless you have to. Consider what you have in savings during this time, too. If it is needed, remember these funds have been put aside for an emergency.

While the stimulus check will not be part of your 2020 taxes and is being treated as forgiven money, the additional $600 and the now $300 added to your unemployment checks will be taxable income. If you've taken the highest amount in unemployment without choosing to take any taxes out, please prepare for what you will owe in your 2020 taxes. If you can, choose to take out some taxes to make your next tax season a little less painful. Also, try and avoid the temptation of online shopping and avoid making 'panic purchases". Instead of using your extra time to scroll through your favorite shopping sites, sit down and create a brand new long term financial strategy. We have no idea how long this might last, so planning ahead is going to be your best bet.

NEGOTIATIONS
Everyone owes money every month, even those who collect it for a living. We all have bills to pay, there's no exception to that. If you can sit down and take the time to talk with your landlord, your credit card companies, your insurance company, and discuss your current circumstances it could be a huge relief to your bank account. Be honest and ask if they can give you some kind of break or pause in your payments, a break or pause in accruing interest, and if you can negotiate your interest rates. According to Business Insider Apple, Chase, Citi, American Express, and Capital One offered their clients emergency support during the first few months of the pandemic.

THE DINNER MENU
Part of your monthly budget includes your grocery bill and funds set aside for going out to eat. As much as we all want to support our favorite local restaurants, eating out adds up just as quickly as it did before the pandemic. Tack on delivery fees to this bill, and it can be even more expensive. The dangers of panic purchasing delivered meals three times a day is very easy thanks to our favorite food apps. Meal planning is going to be just as important as budget planning. You'll need to stick to both to feed your family and save as much money as possible. We understand a few delivered and take out meals, but try and avoid them as much as possible.

THE (UN)ESSENTIALS
The pandemic has done a good job keeping us at home and helped us save money on group activities like going to concerts, going to the gym, and getting our hair and nails done. While things are getting back to normal and these services are slowly becoming available, that doesn't mean you need to jump back into using them again. It's best to wait and do so when your income is back to normal. You've survived without them up until now, and you can continue to do so a little while longer. If you have a lawn care service or a maid service that helps you care for your home, it might be beneficial to pause these services. As essential as they might be, they aren't as important as many other things in your budget. Making these decisions is difficult, but they are possible. You just have to keep going back to the drawing board when things get tough.

We know the last thing you want to hear right now is that you have to sacrifice more than you already have just to hang on. You've given up so much already, changed plans, and lost out on promised opportunities. The truth is, you can keep going. If you continue to make these hard decisions to save your finances and protect your family, the light at the end of the tunnel will become much brighter. If you are looking for the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!

Running a small business can be a dream come true and very daunting. If you use all of the correct tools to help you run your company efficiently, it will be the dream you've worked for. 

Starting a small business in 2020 might sound crazy, but more have popped up nationally than you might think. So many people have lost their jobs, been put on furlough, or are unable to do their jobs virtually that they had to do something. With the unemployment rate at an incredible high, many Americans have been forced to creatively do the pandemic pivot. With so many of us at home with nowhere to go, the birth of honing new or rusty skills and crafting abilities had the opportunity to flourish. People started posting their goods and wares on social media and out of the blue, they have a whole new little business operation running out of their homes.

 Some people were already deep in the process of building their small business when the pandemic hit, while others found solace in being hired by one after their corporate jobs were eliminated. Whatever the situation, small businesses have become quite the lifesavers of 2020. To keep that success and productivity as safe and possible, every small business needs the proper tools to stay productive, organized, and financially stable. What is the best tool out there for these situations? Quickbooks! 

We use Quickbooks ourselves and we offer classes to help small business owners and anyone out there grow and manage their money. One of the biggest reasons small businesses fail, according to Forbes, is because there is no business plan. Poorly managed bookkeeping can sink a business before it even had the chance to grow. Admittedly, bookkeeping is difficult, time-consuming, and very meticulous work. This is why working with a company like ours and using Quickbooks is so imperative. We both make sure that every part of your bookkeeping is done in a properly organized manner, allowing you to get back to the business of your business. 

Quickbooks pro was created specifically for small businesses, and it is very user friendly. It does so much of the work for you, that it's hard to get yourself overwhelmed. With a small-ish price tag of $300, it's a very small price to pay for the huge benefits it gives you. Tax season, after using Quickbooks, should no longer be something you dread or fear. Everything will already be taken care of. It even comes with tutorials to help you get started, and the Quickbooks team is also available to help you when you need it. There are so many benefits just waiting to be used. 

[START UP]

• Everything you need to run your bookkeeping and a majority of your business is in one place in Quickbooks. It will save you time, money, and sanity. 
• It keeps you organized, and you can see your business growing and change in one place. 
• It can help you with everything from income and expense tracking to cash flow management and more. 
• It allows you to accept credit cards and bank transfers from where ever you are. It lets your business be on the go, never restricting your plans or goals. 
• It can help your employees. You can do your companies payroll in minutes. It even gives you the option to upgrade and let the QuickBooks professional bookkeeping team take care of your payroll. 
• You will no longer need to worry about manually tracking your employees. You can track their hours, overtime, and add that into payroll anytime and on any device. 
• If you need more, Quickbooks is there to help. You can connect and partner with a member of their professional bookkeeping staff if you want, and whenever you want. 

[BENEFITS]  

• Money Management. Quickbooks allows you to pay bills, ask clients to pay you, and tracks all of your due dates for bills. You can print checks directly from the program, every transaction is recorded right into the program, and you can link your bank accounts to the program. You no longer need paper statements. 
• Billing. The program will record every expense, no matter the size. You can organize your billing by the client and by type of spending. You also no longer need to reconcile your books manually. 
• Invoicing and Reporting. The program tracks all of your sales automatically. It can create receipts and invoices at the touch of a button. It allows you to bill your clients individually or in large batches which helps when billing multiple clients for the same service. If you have merchant services through Quickbooks, you can accept credit card and debit charges. You can easily scan and deposit checks into your accounts. You also can create all kinds of financial reports including expenses, trends, year over year income, and more. 

[MORE]

• You can use Quickbooks with other software and programs you're already using. You can import documents from Excel and export data from Quickbooks to make tax preparation and filing extremely easy. 
• Security is also an added layer of comfort that the company offers, according to The Visual Communication Guy. Quickbooks data centers are monitored 24/7 and are under constant watch to make sure all of your assets are kept safe. It also comes with its own security so no one can just log into your accounts. It is also the leading software company in safety and the adaptation of new technology. 
• It allows you to customize your business plan for each client so they know that their business is a priority to you. It allows you to nurture relationships with your clients by being able to send messages, notifications, and custom reports through Quickbooks. 

Coming to the point where you can own your own business is a huge accompaniment and celebration. Let that celebration continue and use all the right tools to help you and your company grow and stay organized. If you are looking for the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!