Comprehensive Guide to Financial Practices in Accounting and Bookkeeping
This guide outlines essential financial practices integral to modern accounting and bookkeeping. Covering methods such as single-entry and double-entry bookkeeping, it highlights the importance of accurate financial records, audits, and tax compliance. Key topics include managing payroll, understanding check endorsements, reconciling bank statements, and the use of accounting software. It also discusses the significance of banking policies and maintaining organized financial documentation to ensure accuracy and security in business transactions.
Comprehensive Guide to Financial Practices in Accounting and Bookkeeping
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Presentation Transcript
Financial Records • AMAs help with accounting • Accounting- methodical recording, classifying , and summarizing of business transactions • Audit- review of all financial data in order to ensure the accuracy and completeness of the data • Either internal an accountant employed by the practice or IRS • Bookkeeping-accurate recording of transactions
Financial Records Used Daily • Daily journal • Charge/receipt slips • Patient ledger cards • Accounts payable/receivable • Monthly summary • Balance sheet 255
Accounting Software • Records are kept in paper format or in software
Methods of Bookkeeping • Single-entry method • Oldest • One entry for each transaction • Difficult • Double entry method • Requires more knowledge of accounting • Assets=liabilities + owners equity • One account is debited and another is credited for each transaction • More time consuming • Pegboard method • Most commonly used system • Efficient and easy to learn
Computer Summaries • Computer summaries • Practice analysis report • Aging reports
Banking • Absolute accuracy
Checks and Checking • Practices have 2 types of checking accounts: • Regular business checking account (used most frequently) • Account that pays interest • May also be savings account • Money for taxes or expenses that are not immediate will be kept in interest earning account
Checks • Check-an order to a bank to pay a specific amount of money • Negotiable-to allow the legal transfer of money • To be negotiable: • Contain the specific amount to be paid • Be made out (payable) to payee (could be the title of company instead of a person’s name) • Carry the name of the bank that is making the payment • Specify the date on which the payment is to be made • Be signed by the payer, person who is writing the check and is promising to pay the money
Checks that are NOT Accepted • Postdated-dated for the future • Predated-dated in the past • Third-party checks-written by an unknown third party • Check with an annotation of “Paid in Full”-cannot accept this when it is not the full amount
Check Endorsements • Blank endorsement-signature of the person to whom the check is payable is placed on the back of the check (can be cashed by anyone) • Full endorsement-indicates the person, company, account number, or bank to which the check is being transferred followed by payee’s name • Restrictive endorsement-safest and most commonly used in business • Restricted: For Deposit Only
Deposits • Deposits-checks and cash placed into the account belonging to the practice • Deposit slip • Preprinted or at bank (blank) • Proof • Kept with check regsiter, checkbooks in secure place
Returned Checks Bank may return a check if: • Not completed properly • Missing date or signature • Insufficient funds (NSF)-not enough money in the account • Returned with a fee of $25
Banking Policy of the Practice • Physician must authorize with the bank who is allowed to sign all checks • One person to write and another to sign (safe-avoid mistakes and misappropriations) • 2 signatures
Bank Reconciliation • Bank reconciliation-the new balance on the statement must be compared w/ the checkbook balance to determine whether there is a difference between the amounts • Steps: • Compare cancelled checks from bank to bank statement • Compare checks listed on statement with checkbook • Compare deposits recorded in checkbook with statement • Interest: record in checkbook • Complete reconciliation form • If final amount = great! • If not, do again.
Banking Electronically • Efficient and accurate • Activities available online: • Checking balances in the accounts • Receive electronic deposits • Find out which checks have cleared • Transfer money from one account to the other • Pay bills • E-signature-a unique identifier • Granted in June 2000, same as paper and pen signature
Petty Cash • Petty cash fund-fund containing small amounts of cash to be used for small expenses
Payroll • Payroll-total earnings of all the employees in the practice • If your job you will be responsible for these tasks: • Calculate the earnings of employees • Subtract the correct amount of taxes and other deductions • Create employee payroll records • Prepare the salary checks • Submit payroll taxes • Keep current with formulas and regulations issued by the IRS that affect payroll
Employee Payroll Records • Create a payroll information record with the following information: • Name, address, SS#, marital status, # of dependents • Pay schedule (how often they are paid: weekly or biweekly) • Type of payment (straight salary or hourly) • Employee requested deductions (employer sponsored insurance plan, contributions to a savings plan, additional taxes withheld) • If not a citizen, must be authorized to work in the US • Completed Employment Eligibility Verification Form • Form I-9- Verifies the person is legally admitted alien or authorized to work in this country
Employer/ee ID Numbers • Employer identification number (EIN)-enables the IRS to track the financial activity; of employers in meeting payroll and tax obligations • AKA Tax identification number
Taxes Deducted from Earnings • Direct earnings • Salaries (fixed amounts paid regardless of hours worked) • Wages (pay based on an hourly or daily specific rate) • When first hired, employees must complete the Employee’s Withholding Allowance Certification • Form W-4 • Number of allowances stated for exemptions to be used when calculating taxes withheld • Wage bracket tables supplied by the IRS
FICA Tax • Federal Insurance Contributions Act (FICA) • Governs the social security system • Law requires that a certain amount of money be withheld for SS • Employee pays half the required contribution and employer pays other half • The amount is deducted in two separate payroll taxes: • One helps finance Medicare • The other helps fund SS pension benefits • These amounts are dictate by the IRS • Are a percentage of the employee’s taxable earnings • Congress can change this amount yearly
Calculating Payroll • Offices use spreadsheet programs to calculate payroll • Gross earnings • Salary-amount of earnings for the period • Hourly-number of hours times hourly rate • Exemptions; state and local tax deductions-find the # claimed by the employee on the W-4 form, refer to the IRS tax table for the amount to be deducted, subtract them from gross earnings • FICA taxes-withhold and deduct half the amount due for the pay period from gross earnings; other half paid by practice • Unemployment taxes-vary by state; withhold as necessary • Voluntary deductions-insurance, savings plan, additional tax withholding, etc. • Employer’s obligation-Post the employer’s FICA contribution and taxes due to fed and state unemployment funds to physician’s account • Net earnings=Gross – total deductions
Employer’s Tax Responsibilities • Federal Unemployment Tax Act-FUTA • Employers are required to help fund this account • Used to help those who have been without work for a specified period of time as they seek new employment • Percentage of each employee’s gross salary but is not deducted from employee’s salary-employer contributes • Some states both employee and employer contributes • Payments into a state unemployment fund are applied as credit against the FUTA tax • Tax return obligations: practice must make federal tax withholding payments and FICA payments to a federal deposit account in a Federal Reserve Bank • IRS imposes severe penalty for lack of monthly deposits • Employer has to file a quarterly tax return, Form 941 to report federal income and taxes withheld from paychecks
Payroll Records: Contents and Retention • Law requires employer to retain payroll records for 4 years • Records must contain: • Name • SS# • Address • Number of exemptions claimed • Gross salary earned • Net salary paid • Income taxes withheld • FICA, state and local taxes deducted
Electronic Payroll: Direct Deposit • Direct deposit-the employee’s net pay is automatically withdrawn from the practice’s account and deposited into the employee’s account • Electronic funds transfer (EFT) • Physician office must contract with the bank for this • Employees must give employers their checking account numbers • Employee receives a deposit stub showing gross, net, and deductions • Advantages • Loss or theft of checks is eliminated • Productivity and cost-savings are increased • Convenience of eliminating trip to bank, money available day of
