Here are some questions you may ask yourself when your processing your business accounting records and you aren't quite sure as to what to do next:
1. Is it an office expense or an asset?
When you purchase office equipment for your business, are you categorizing it correctly? Technically if you purchase any items such as the items below you should be categorizing them as an asset.
This allows you to depreciate them and thus deduct them on your business tax return. The general rule is anything over $100.00 in value should be capitalized as an asset and depreciated. If below $100.00 in value, you should just consider it as an expense.
2. Is it a posting transaction or non-posting, and what is non-posting?
Non-posting accounts occur in your accounting records and must be kept closely watched and maintained to keep your orders and order history accurate. Two types of non-posting accounts are purchase orders and sales orders. Let's begin with purchase orders. Purchase orders are orders you are making for your goods/items (otherwise known as inventory). They are non-posting since the order does not have any dollar value attributed to the accounting records UNTIL the inventory is received. Once the inventory is received, the corresponding items on the purchase order are reduced from the purchase order, and received into inventory at the good(s)/item(s) value and when all items are received, the purchase order is closed.
Another type of non-posting order, the sales orders, are orders from customers not yet in stock. They are non-posting since the items are not yet received. Once the customer's item(s) are received, the sales order is invoiced (moved to a sales invoice for the customer) which means items that have been reserved for that customer received on the order thus invoicing the customer. At this point, posting is now done in the inventory, sales, cost of goods sold and accounts payable accounts.
If you would like more tips about accounting, my book
is a great resource to help grasp the concepts in an easy to read format with chapter summaries and short enough to give you just enough information you need to get your accounting back in balance.
Pfeiffers Accounting & Consulting LLC