This Ain’t This Ain’t Your Momma’s Your Momma’s Quickbooks!Quickbooks!

Effective Accounting Effective Accounting Management with TotalFBOManagement with TotalFBO

Presented by: Janice M. PrattSr. Research Analyst

Horizon Business Concepts, Inc.2010 TotalFBO® User Conference

Do You Do GAAP?Do You Do GAAP?

GGenerally enerally AAccepted ccepted AAccounting ccounting PPrinciplesrinciples

accounting rules used to prepare, accounting rules used to prepare, present, and report financial present, and report financial statementsstatements

includes local applicable Accounting includes local applicable Accounting Framework, related accounting law, Framework, related accounting law, rules and Accounting Standardsrules and Accounting Standards

The Philosophy of AccountingThe Philosophy of Accounting

The conceptual framework for the The conceptual framework for the professional preparation and auditing of professional preparation and auditing of financial statements and accounts. financial statements and accounts.

The issues which arise include:The issues which arise include:• the difficulty of establishing a the difficulty of establishing a true and fair true and fair

valuevalue of an enterprise and its assets; of an enterprise and its assets; • the the moral basismoral basis of disclosure and discretion; of disclosure and discretion;• the the standards standards and laws required to satisfy the and laws required to satisfy the

political needs of investors, employees and political needs of investors, employees and other stakeholders.other stakeholders.

GAAP is Composed of:GAAP is Composed of:

4 basic Assumptions4 basic Assumptions

4 basic Principles4 basic Principles

4 basic Constraints4 basic Constraints

GAAP AssumptionsGAAP Assumptions

Business EntityBusiness Entity• Separate from personal or other business financesSeparate from personal or other business finances

Going ConcernGoing Concern• Business is expected to continueBusiness is expected to continue

Monetary UnitMonetary Unit• Stable currencyStable currency

Time-periodTime-period• Reporting divided into periodsReporting divided into periods

GAAP PrinciplesGAAP Principles

CostCost• Verifiable, unbiased asset valuesVerifiable, unbiased asset values

RevenueRevenue• Income reported when earned, not when cash received Income reported when earned, not when cash received

(Accrual Accounting)(Accrual Accounting)

MatchingMatching• Expenses reported when related income reportedExpenses reported when related income reported

DisclosureDisclosure• Information disclosed should be enough to make a judgment Information disclosed should be enough to make a judgment

while keeping costs reasonablewhile keeping costs reasonable

GAAP ConstraintsGAAP Constraints

ObjectivityObjectivity• Financial Statements to be backed up by objective evidenceFinancial Statements to be backed up by objective evidence

MaterialityMateriality• Reported information items should be significantReported information items should be significant

ConsistencyConsistency• Use same methods and principles from year to yearUse same methods and principles from year to year

PrudencePrudence• Choose method least likely to overstate assets and incomeChoose method least likely to overstate assets and income

GAAP is ChangingGAAP is Changing

Originally promulgated by AICPA Originally promulgated by AICPA Council Council • American Institute of Certified Public AccountantsAmerican Institute of Certified Public Accountants

Now codified and updated by FASBNow codified and updated by FASB• Financial Accounting Standards BoardFinancial Accounting Standards Board

Soon to be replaced with IFRSSoon to be replaced with IFRS• International Financial Reporting Standards also subscribed to International Financial Reporting Standards also subscribed to

by most European countriesby most European countries

TotalFBO designed to GAAPTotalFBO designed to GAAP

Double-entry, accrual systemDouble-entry, accrual system Standard chart of accounts designStandard chart of accounts design Control accounts supported by detail Control accounts supported by detail

ledgersledgers Secure audit trailSecure audit trail Work in Process postingWork in Process posting Date-sensitive, Date-controlledDate-sensitive, Date-controlled Business entity database/license structureBusiness entity database/license structure

Spreadsheet AccountingSpreadsheet Accounting

Can be cash or accrualCan be cash or accrual No balancing requiredNo balancing required No standard chart of accountsNo standard chart of accounts No Work In Process PostingNo Work In Process Posting Controls missing or easily overridenControls missing or easily overriden Designed to be uploaded to “professional” Designed to be uploaded to “professional”

system for CPA reviewsystem for CPA review Assumes purpose is mainly for tax Assumes purpose is mainly for tax

preparation taskpreparation task

(Quickbooks, Excel, Etc.)

Professional AccountingProfessional Accounting

Use Professional Accounting System Use Professional Accounting System to achieve professional resultsto achieve professional results• TotalFBO, MAS90, Great PlainsTotalFBO, MAS90, Great Plains

Use Spreadsheet Accounting System Use Spreadsheet Accounting System when accountability and growth are when accountability and growth are not considerationsnot considerations• Clubs, personal finances, analysisClubs, personal finances, analysis

Who will do your accounting?Who will do your accounting?

Accounting clerkAccounting clerk BookkeeperBookkeeper Full-charge BookkeeperFull-charge Bookkeeper AccountantAccountant CPACPA CFOCFO Your spouseYour spouse

Accountant TrainingAccountant Training

Daily business information & Daily business information & statement preparationstatement preparation

Pricing decisions & business Pricing decisions & business modelingmodeling

Tax preparationTax preparation AuditingAuditing Specialty areas (international, oil & Specialty areas (international, oil &

gas, securities)gas, securities) Financial planningFinancial planning

Should you hire a CPA?Should you hire a CPA?

For specialty areas For specialty areas (planning & income (planning & income tax prep)tax prep)

For auditsFor audits For business For business

changes changes (acquisitions, sales, (acquisitions, sales, legal entity choices)legal entity choices)

For certain Analysis For certain Analysis projectsprojects

For daily For daily bookkeeping bookkeeping managementmanagement

For Internal financial For Internal financial statement prepstatement prep

For account For account reconciliationsreconciliations

For sales taxesFor sales taxes For payrollFor payroll

YES! NO!

““Full-Charge” BookkeeperFull-Charge” Bookkeeper Understands double-entry accrual systemUnderstands double-entry accrual system Can prepare financial statements with Can prepare financial statements with

integrity integrity Fully skilled in sub-ledger managementFully skilled in sub-ledger management Can manage accounting staffCan manage accounting staff Can see the “big picture”Can see the “big picture” Can customize POS, chart of accounts, and Can customize POS, chart of accounts, and

other systems to produce appropriate other systems to produce appropriate informationinformation

Elements of Accounting System Elements of Accounting System General JournalGeneral Journal General LedgerGeneral Ledger Detail Ledgers:Detail Ledgers:

• Accounts ReceivableAccounts Receivable• Accounts PayableAccounts Payable• Bank AccountsBank Accounts• Payroll LedgerPayroll Ledger• Inventory ChangesInventory Changes• Asset ManagementAsset Management

Supporting DocumentationSupporting Documentation

Financial ReportsFinancial Reports JournalsJournals Account DetailsAccount Details Trial Balance Trial Balance Bank Account ReconciliationsBank Account Reconciliations Accounts Payable AgingAccounts Payable Aging Accounts Receivable AgingAccounts Receivable Aging Physical Inventory ValuationPhysical Inventory Valuation Payroll RegisterPayroll Register Asset ValuationAsset Valuation Budget ComparisonsBudget Comparisons

Financial StatementsFinancial Statements

Balance SheetBalance SheetWhat is the value of the business at any POINT in time? What is the value of the business at any POINT in time?

Includes Assets, Liabilities, Net WorthIncludes Assets, Liabilities, Net Worth

Income Statement (Profit & Loss)Income Statement (Profit & Loss)What is the income relative to costs, expenses and taxes What is the income relative to costs, expenses and taxes

for a specified PERIOD of time?for a specified PERIOD of time?

Cash FlowsCash FlowsWhat were the sources of cash into the company and What were the sources of cash into the company and

how/where was it spent?how/where was it spent?

Those Debit & Credit Thingeys...Those Debit & Credit Thingeys...

The heart of “Double Entry” The heart of “Double Entry” accountingaccounting

LEFT and RIGHT sides… OF WHAT?LEFT and RIGHT sides… OF WHAT? What’s the point? Isn’t it just double What’s the point? Isn’t it just double

work?work?

Assures Math accuracy

Shows Effect on business and Source of the change

Balancing the BooksBalancing the Books

ASSETSASSETSCash Cash

ReceivablesReceivables

InventoryInventory

Building & EquipmentBuilding & Equipment

““Goodwill”Goodwill”

LIABILITIESLIABILITIESPayablesPayables

LoansLoans

EQUITYEQUITYInvestmentInvestment

Net Profit or Loss:Net Profit or Loss:

INCOMEINCOMESalesSales

InterestInterest

Asset SalesAsset Sales

EXPENSESEXPENSESCostsCosts

ExpensesExpenses

PayrollPayroll

TaxesTaxes

Dr Cr

CrDr

Evaluating PerformanceEvaluating Performance

Are financial statements timely?Are financial statements timely? Are they complete?Are they complete? Are they accurate?Are they accurate? Does department seem “always behind”?Does department seem “always behind”? Is one staffer working too hard?Is one staffer working too hard? Can you get answers to business Can you get answers to business

questions?questions? Is employee flexible as business changes?Is employee flexible as business changes?

What’s the Real Problem?What’s the Real Problem?

Are YOU requiring the wrong things?Are YOU requiring the wrong things? Is system unnecessarily complex?Is system unnecessarily complex? Have you understaffed?Have you understaffed? Is equipment/space outdated?Is equipment/space outdated? Is employee lost/overwhelmed?Is employee lost/overwhelmed? Is better training the answer?Is better training the answer?

Get Up to SpeedGet Up to Speed

Careful hiring and Promotion PracticesCareful hiring and Promotion Practices

Bookkeeping CoursesBookkeeping Courses

www.totalfbo.com/HBCSupport/Educate.aspxwww.totalfbo.com/HBCSupport/Educate.aspx

Horizon training ??Horizon training ??