Beginner Bookkeeping October Updates

Welcome to another instalment of Bookkeeping Alerts!

What can you find in this issue?

1. Types of Bank Accounts - What's best for business?

2. Show Me the Money! My Profit and Loss Statement says I have made a profit of $10,000 but my bank account has much less. Why is that?

3. Excel cash book formulas - amended

4. What's next?

1. Types of Bank Accounts

Check out my new article about the types of bank accounts available for businesses.

Types of Bank Accounts

Whether you are a sole trading owner or a registered company you will find some useful tidbits of information to help you figure out what type of account you should be using, how to reduce your bank fees (yes, it is possible!) and how to use a bank account in conjunction with the bookkeeping, such as paying bills. Plus more!


2. Show Me the Money!

A famous saying by Tom Cruise and Cuba Gooding Jr in Jerry MaGuire, and also a saying used by business owners when their profit and loss statement (P&L) shows a fantastic profit but yet the bank account has nothing in it.

Well first of all, let me just say, a profit of $10,000 does not equal $10,000 in the bank. Why is that? Where's the money gone?

One reason is that withdrawals from the bank account for loan repayments, asset purchases and owner's personal spending are not shown on the P&L. They are shown on the balance sheet.

So that could be a whole whack of money that's gone out the bank account but that is not accounted for on the P&L.

Another reason is that there are two types of P&L - cash or accrual.

For reporting purposes, the accrual method is usually always used. This means that invoices issued to customers or purchase invoices received from suppliers are included on the P&L even though none of them have been paid yet.

So the accrual P&L shows the value of the income and expenses for which payments into or out of the bank are still expected.

There has been no cash received or spent yet from the bank for these bills because they are still owed. These are entered using the accounts payable and accounts receivable system.

Next time your boss or your client asks you where the money's gone these are the first two explanations you can provide.

3. Excel Cash Book Formulas

My sincere apologies to those of you who use the P&L in the excel cash book. There were some formula errors that caused some of the income and expenses to be missing from the totals in the P&L.

These formulas have now been corrected and the download has been updated. And just as a side note, this P&L is cash basis (not accrual as discussed in the above topic).

If you have been using the excel cash book and you require the P&L to be updated, simply download the new cash book and copy the cells from the totals on the P&L into your cash book.

Excel Cash Book

Contact me if you require more specific help.


4. What's Next?

Coming soon - article/s relating to business filing systems, manual and electronic. If you want to progress from shoe box filing into a more sophisticated, professional system that ties in beautifully with bookkeeping, and is more easy than you think, then this information will be for you.

Thanks for reading. Happy bookkeeping!

Sarah Booysen