How Do I Sort Items for Bookkeeping? (Part 2)
Posted by admin on Aug 2, 2011 in Bookkeeping | 12 comments
In Part 1 of this blog series, we looked at sorting your receipts by category, its advantages and disadvantages. Here in Part 2, we are going to look at a second way of sorting your slips.
Sort your receipts by date and by statements. Sound confusing? Not really. This form of sorting means that you will need a dedicated bank account and/or dedicated credit card for your business. You sort your receipts and attach them to the statements as they come in by e-mail or snail mail.
Advantages:
1) You capture more expenses, even if you have missing receipts. So long as you keep the vast majority of your receipts (try not to lose any though!) and have them directly tied to your business cards and accounts, the CRA (Canada) or IRS (U.S.) will allow “reasonable” expenses go through as a legitimate expense if a receipt or two is missing. This depends on your diligence in keeping business items with your business bank account and/or credit card.
2) Using dedicated bank accounts and credit cards for your business means expense items will be found in one, two, or at most three places. If you even get an audit by the CRA or IRS, having your receipts processed and attached to the statements, plus each account is reconciled in the bookkeeping program, they will love you for your high level of organization. This means the audit process will run more smoothly with the agent auditing your books.
3) By having statements reconciled to your business also means that your bookkeeper will be able to expense such items as bank charges, annual fees, overdraft interest, and credit card interest at 100% expense. The trick, however, is not to mix personal expenses to your dedicated accounts. Ensure you keep a private and personal bank account and credit card separate from your business accounts for personal expenses and activity.
Disadvantages:
The only real disadvantage I can think of using this method is when you as the business owner decide to have your bookkeeper do all this sorting for you. The cost associated with this method will be higher because the detail needed in this method takes more time.
Seianna Financial Services is “Serious About Your Business”. Go to our bookkeeping page and check out our prices, service guarantee and to contacts to find an office most convenient for you. We can do bookkeeping for clients in every province and territory except Quebec.
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