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Your Favorite Online Accountant Helping businesses maximize business profit through proper accounting practices.

ACCOUNTING TIP 23The sales journal and purchases journal are used to record credit sales and credit purchases respective...
06/03/2024

ACCOUNTING TIP 23

The sales journal and purchases journal are used to record credit sales and credit purchases respectively, i.e. the sales journal is used to record credit sales while the purchases journal is used to record credit purchases. No other transaction is recorded in either except these two mentioned.

Keep in mind that in accounting, only the sale of a business's product or service and the purchase of materials used in production or to carry out service is regarded as either sale or purchase. Any sale or purchase outside of a business's main business is not recognized as a sale or purchase.

Now and Always, Your Favorite Online Accountant 🥰🥰🥰😍

ACCOUNTING TIP 22Cash book is a book to record all cash transactions, whether it is a sale, purchase, capital introducti...
05/03/2024

ACCOUNTING TIP 22

Cash book is a book to record all cash transactions, whether it is a sale, purchase, capital introduction or withdrawal, asset purchase or sale, salary and rent payment etc. As long as cash goes out or comes in, it should be recorded in the cash book.

The cash book is divided into 2 sides; debit (Dr) and credit (Cr) sides. The debit side records all inflows of cash while the credit side records all outflows of cash.

Also, the cash book includes bank transactions as they are also referred to as cash transactions in accounting.

Now and Always, Your Favorite Online Accountant 🥰😍😍🥰

Dear Business Owner,Do you record your transactions? I'm hoping from all I have been saying, you do now if you didn't be...
04/03/2024

Dear Business Owner,

Do you record your transactions? I'm hoping from all I have been saying, you do now if you didn't before. That's awesome 👍.
How do you record?
Do you write all the transactions in statement form?
Do you use only one book to record all?

That's a good start but it could be better.

The recommended accounting way is to use all the books that apply to your business in recording and to also use the table format to record, but that's no biggie, you can easily effect these changes. Now go and sin no more ☺️😍

Still Your Favorite Online Accountant 🥰😍

ACCOUNTING TIP 21The books 📚 used for recording transactions in accounting are also called journals and they are 6️⃣ in ...
04/03/2024

ACCOUNTING TIP 21

The books 📚 used for recording transactions in accounting are also called journals and they are 6️⃣ in number. You may not have to use all 6️⃣ of them, depending on the nature of your business or you could just choose to use 1️⃣ which is structured in a way that any and all business transactions can be recorded. However, doing this will defeat the primary aims of using books in recording which are to;

Make classifying and tracking each transaction easier.
Make transaction recording less bulky and messy.

The books 📚 used in recording are;

Sales journal or day book
Purchases journal or day book
Cash book or journal
Return inwards journal or book
Return outwards journal or book
General journal or journal proper.

ACCOUNTING TIP 20Your Accounting system is only as effective and efficient as your record keeping.Record keeping could b...
27/02/2024

ACCOUNTING TIP 20

Your Accounting system is only as effective and efficient as your record keeping.

Record keeping could be said to be the most important part of accounting as the data you collect and record are what will form your final accounts and eventually fulfill the purpose of accounting which is informed decision making.

Whatever method of accounting you decide to use; manual, digital or software, you must enter your transactions yourself as the data to be processed into information for decision making. This is another reason why it is good to take record keeping seriously and to know how to go about it.

Also, if there are any errors in your data entry (record keeping) you can be sure that the information processed by your accounting system would not be accurate.

Now and Always, Your Favorite Online Accountant 😍🥰🥰

ACCOUNTING TIP 19The process of recording in Accounting is systematic.Transaction recording is the first practical step ...
20/02/2024

ACCOUNTING TIP 19

The process of recording in Accounting is systematic.

Transaction recording is the first practical step in Accounting and majorly there are 6 books 📚 which are used.

Each book is used to record certain types of transactions.

The reason for using different books includes but not limited to;

Having similar transactions grouped together makes it easier to access and track transactions.

Computation is easier when transactions are grouped.

When transactions are grouped they look less messier.

Now and Always, Your Favorite Online Accountant 😍🥰

ACCOUNTING TIP 18Accounting starts with the process of data collection from source documents such as receipts, invoices,...
19/02/2024

ACCOUNTING TIP 18

Accounting starts with the process of data collection from source documents such as receipts, invoices, sales order forms, etc.

This is another importance of source documents aside from them being a proof of transaction.

Dear Business Owner,Do you have a term or agreement for credit sales?Do you know the advantages of having everything pro...
17/02/2024

Dear Business Owner,

Do you have a term or agreement for credit sales?

Do you know the advantages of having everything properly spelt out?

If you do question 1 above, do you record the terms and agreement for credit sales or you simply trust the buyer to keep his own side of the agreement 🤝?

ACCOUNTING TIP 17SAFE CREDIT SALES TIP 5️⃣Have a terms of sale and record it appropriately.Before giving credit there sh...
17/02/2024

ACCOUNTING TIP 17

SAFE CREDIT SALES TIP 5️⃣

Have a terms of sale and record it appropriately.

Before giving credit there should be an agreement on all issues pertaining to the sales such as payment time, grace or extra period to pay, discount, if any, for early payments, markup etc.

This items should be clearly stated for both parties to know, understand and agree and the seller should record this properly.

Dear Business ownerDo you know the importance of having a credit sales limit?If yes, do you have credit sales limit per ...
16/02/2024

Dear Business owner

Do you know the importance of having a credit sales limit?

If yes, do you have credit sales limit per customer or per time?

Do you strictly adhere to this or do you compromise all the time in order to sell?

ACCOUNTING TIP 16SAFE CREDIT SALES TIP 4️⃣Have a credit limit.A credit limit is the point where the amount of credit sal...
16/02/2024

ACCOUNTING TIP 16

SAFE CREDIT SALES TIP 4️⃣

Have a credit limit.

A credit limit is the point where the amount of credit sales get to and you decide not to give credit sales anymore for the time being of until the last one is paid.

A credit limit could be per time e.g daily, weekly or monthly credit limit, and it could also be per person, that is, you have a limit a person gets to that you wouldn't give any more credits until he pays the last one or a part of it.

Dear Business Owner,Do you know what credit sales addon or mark-up is?Do you know its benefits? If no, check previous po...
15/02/2024

Dear Business Owner,

Do you know what credit sales addon or mark-up is?

Do you know its benefits? If no, check previous post.

If yes, do you always insist on credit sales having a mark-up or you allow the buyer to negotiate?

ACCOUNTING TIP 15SAFE CREDIT SALES TIP 3️⃣Have a mark-up for credit sales.Inorder to make safe credit sales it is import...
15/02/2024

ACCOUNTING TIP 15

SAFE CREDIT SALES TIP 3️⃣

Have a mark-up for credit sales.

Inorder to make safe credit sales it is important to have a mark-up or add-on to the normal sales price for credit sales.

This will help in covering debt management and recovery cost, reducing the effect of inflation on the money owed etc.
Now and Always, Your Favorite Online Accountant 😍🥰

Dear Business Owner,Do you have a criteria for allowing credit sales or do you just allow anyone who asks?Do you know th...
13/02/2024

Dear Business Owner,

Do you have a criteria for allowing credit sales or do you just allow anyone who asks?

Do you know that regardless of your business size you can carry out customer checks?
You do not need to engage the services of credit worthiness checkers if you don't have the means but you can start from where you are to minimize your risk.

Still, Your Favorite Online Accountant 🥰

ACCOUNTING TIP 14SAFE CREDIT SALES TIP 2️⃣Before giving out credit to a customer, carry out checks such as credit worthi...
13/02/2024

ACCOUNTING TIP 14

SAFE CREDIT SALES TIP 2️⃣

Before giving out credit to a customer, carry out checks such as credit worthiness, integrity check and personality checks, on the customer.

To avoid bad debts, you have to put in certain criteria that qualify a person to receive credit sales from you. Such criteria might include how long and how much the person has been buying from you, character, employment status, marital status etc.
You decide the perimeters by which you judge a customer credit worthy or not but make sure a customer passes the evaluation before allowing credit sales.
This doesn't mean you won't still have bad debts but this will help reduce the risk.

Now and Always, Your Favorite Online Accountant 🥰😍

Dear Business Owner,Do you know that your current financial state should be a criterion for deciding if you will give cr...
12/02/2024

Dear Business Owner,

Do you know that your current financial state should be a criterion for deciding if you will give credit sales or not?

Do you do business checks before giving out credit?

Do you also know that, without a proper record and analysis of your business books, your business check might not be accurate and true?

Still, Your Favorite Online Accountant 🥰

ACCOUNTING TIP 13SAFE CREDIT SALES TIP 1️⃣ Credit sales should only be allowed when the business is in a state where it ...
12/02/2024

ACCOUNTING TIP 13

SAFE CREDIT SALES TIP 1️⃣

Credit sales should only be allowed when the business is in a state where it wouldn't bring the whole business down.

A business that is considering allowing credit sales should check its financial state and current cash flow. It should also check if there is an event coming up that might require a large cash flow such as the payment of salaries, rent, purchase of goods or assets, or any major expense.

Now and Always, Your Favorite Online Accountant 🥰😍

Dear Business owner,Do you know that credit sales is also a form of sale which has advantages?Do you have a strict no cr...
07/02/2024

Dear Business owner,

Do you know that credit sales is also a form of sale which has advantages?

Do you have a strict no credit policy or not?

If yes to question 2, would you consider incorporating credit sales now that you know its advantages or are the disadvantages too great for you?

Still, Your Favorite Online Accountant 😍🥰

ACCOUNTING TIP 12Not all credit sales are bad sales or bad debts. Businesses should not totally run away from credit sal...
07/02/2024

ACCOUNTING TIP 12

Not all credit sales are bad sales or bad debts. Businesses should not totally run away from credit sales, they should try to avoid Bad debts at all cost.

Bad debts are credit sales that buyers end up not paying for.

Credit sales have the following advantages; it increases customer base, it increases total sales, it increases customers loyalty and it gives the business competitive edge.

The disadvantages of credit sales include; the potential to become bad debts, it affects a business's cash flow, extra cost of debt management and recovery might be incurred and the business might have to take loans to continue operating.

Now and Always, Your Favorite Online Accountant 🥰😍

Dear Business Owner,Do you know what credit sales are?Do you give credit sales to your customers?Do you regard it as sal...
06/02/2024

Dear Business Owner,

Do you know what credit sales are?

Do you give credit sales to your customers?

Do you regard it as sales for the period or do you think that sales are only when you get paid for the goods?

Still, Your Favorite Online Accountant 😍🥰

ACCOUNTING TIP 10Inventory is oftentimes used interchangeably with purchases, however, there is a difference.Inventory i...
06/02/2024

ACCOUNTING TIP 10

Inventory is oftentimes used interchangeably with purchases, however, there is a difference.

Inventory is defined generally as the total list of items in a place.

In accounting, inventory is referred to as the materials, goods and items held by a business to sell and make profit.
For a production and sales business, it is the total list of materials held to be used in production while for a service business, it is a list of all items that are used in carrying out the business.
Inventory is also referred to as Stock.

Purchase is, however, the buying of inventory.

Now and Always, Your Favorite Online Accountant 😍🥰

Dear Business owner,Ever heard of inventory or stock before now?Can you identify inventory in your business?Do you know ...
05/02/2024

Dear Business owner,

Ever heard of inventory or stock before now?

Can you identify inventory in your business?

Do you know the importance of stock or inventory?

ACCOUNTING TIP 10Inventory is oftentimes used interchangeably with purchases, however, there is a difference.Inventory i...
05/02/2024

ACCOUNTING TIP 10

Inventory is oftentimes used interchangeably with purchases, however, there is a difference.

Inventory is defined generally as the total list of items in a place.

In accounting, inventory is referred to as the materials, goods and items held by a business to sell and make profit.
For a production and sales business, it is the total list of materials held to be used in production while for a service business, it is a list of all items that are used in carrying out the business.
Inventory is also referred to as Stock.

Purchase is, however, the buying of inventory.

Dear Business Owner,Do you know what withdrawal is in business? If no, check the previous post.If yes, do you make withd...
01/02/2024

Dear Business Owner,

Do you know what withdrawal is in business? If no, check the previous post.

If yes, do you make withdrawals from your business?

If yes to question 3, do you account for and manage for it or it is as the spirit leads?

Do you know the consequences of withdrawal on your business?

01/02/2024

Happy New Month
🥳🥳🥳🥳🥳🥳🥳🥳🥳🥳
Let's have an even better February 🎊🎉

ACCOUNTING TIP 9Withdrawal in Accounting refers to a business owner taking money or goods for personal use from the busi...
01/02/2024

ACCOUNTING TIP 9

Withdrawal in Accounting refers to a business owner taking money or goods for personal use from the business.

There are two types of withdrawal; cash withdrawal which is referred to as drawings and goods withdrawal which is referred to as Goods withdrawn.

Now and Always, Your Favorite Online Accountant

Dear Business Owner,Do you know what retained Earning (RE) is? If no, see last post 🧾.Do you retain a part of your profi...
31/01/2024

Dear Business Owner,

Do you know what retained Earning (RE) is? If no, see last post 🧾.

Do you retain a part of your profit or is it Dorime levels straight.

Oya do the needful 😊

Always, Your Favorite Online Accountant 🥰

Everyone carries out business with the aim to make profit, grow and take care of the owners too. It is okay to use your ...
31/01/2024

Everyone carries out business with the aim to make profit, grow and take care of the owners too. It is okay to use your business MONEY when and only when you are sure it is profitable and your spending is only from the PROFIT.

However, for a business to grow, the business has to put back some or all of its profit into the business either to buy more materials or to buy equipment or to prepay for a particular service the business needs or to just hold in reserves in case of a future need or emergency

Dear Business Owner, Do you know what Cash in hand is?If no, see previous post 🧾If yes, do you know that cash in hand do...
30/01/2024

Dear Business Owner,

Do you know what Cash in hand is?
If no, see previous post 🧾
If yes, do you know that cash in hand does not equal profit?
If yes, do you regard them as different items or do you think it doesn't matter, any and every cash at hand is profit to be used?

Still, Your Favorite Online Accountant 🥰

ACCOUNTING TIP 7Cash in hand or Bank doesn't equal profit.That a business has a huge stockpile of cash either at hand (m...
30/01/2024

ACCOUNTING TIP 7

Cash in hand or Bank doesn't equal profit.

That a business has a huge stockpile of cash either at hand (meaning physical cash), in the bank, or saved in other forms such as cryptocurrency, does not mean the business is profitable at the moment. True, more cash would mean more sales which increases the likelihood of more profit but a part of that cash might be for expenses incurred that haven't been paid, the same thing goes for little or no cash in hands.

I have a business I used to consult for (unofficially of course) and the owner would always complain about not making profits because she wasn't seeing a huge stockpile of cash at any time. I told her this "Profit is not Cash and not all cash is profit". I never got around to preparing her statements so I can not categorically say the business was in profits but my general assessment of the business was that cash was usually being tied down in the form of stock held. The business always had a huge stockpile of production materials and they kept restocking. Now this has its merits and demerits and in due time I will get to it so make sure you stick with me.

Now and Always, Your Favorite Online Accountant 🥰.

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