Journal 1 shows the employee’s gross wages ($1,200 for the week). After subtracting some of the most common payroll taxes, the employee’s wages payable or “take-home” pay is $925. One method for recording payroll is to create journal entries to account for each piece of payroll, including employee paychecks and employer taxes. Keeping track of payroll entries, […]
Over time, you will also analyze the data horizontally in context with other profit and loss statements to help you to make informed financial decisions and forecasts. You can also use the same technique to understand other businesses’ finances. Use this template to create a P&L statement that tracks your month-by-month and year-to-date (YTD) costs […]
While the insurance used for December ($100) will be reported on December’s income statement as an Insurance Expense. Prepaid expenses are those expenses which have been paid in advance and the related benefits are not received within the same accounting period. The benefits of expenses incurred are carried forward to the next accounting period. Once […]
It either increases equity, liability, or revenue accounts or decreases an asset or expense account (aka the opposite of a debit). Using the same example from above, record the corresponding credit for the purchase of a new computer by crediting your expense account. It either increases an asset or expense account or decreases equity, liability, […]
Small business owners try to do a tax write-off on as many expenses as possible to gain more tax credits and decrease the amount of tax they need to pay. When a nonperforming loan is written off, the lender receives a tax deduction from the loan value. Not only do banks get a deduction, but […]