Thanks for watching! (And sorry for the choppy video... I think my computer is overwhelmed... working on it for next time.) Are you using cash or accrual basis?
Cash basis is easiest for small businesses to track and understand, but as I mentioned above, I think accrual is much more helpful for managing your business.
For cash accounting, if I make a business purchase on Aug 1st using my credit card for $100, and pay off my full credit card balance of $500 on Sep 1st via bank transfer, how would I record these transactions in my bookkeeping? Cash accounting is recorded when cash enters or leaves my business. Would I still not record when transactions transpire in my bookkeeping such as my Aug1st purcahse for $100? How would the above scenario play out?
Transaction of $100 (expense) recorded on 8/1. Paying off your credit card balance is just shifting cash around on your balance sheet, so there's no impact to your Profit & Loss Statement. The other $400 would've been recorded/expensed whenever those charges were made.
As an amazon seller, any major drawbacks of using cash accounting? Ill be using waveapps for bookkeeping. Just want to keep bookkeeping as simple as possible. Still not sure if sales made on amazona and in my account balance are considered "cash" or when amazon transfers it to my bank.
Your customers are paying with a credit card, so you've made sales at the time the sale is made because that's when the money has been "constructively received." Same deal with checks... if you receive a check in the mail, you've received the money for cash purposes even though it's not in your bank account yet. There are a TON of people out there who do this wrong. In my opinion, if you're an Amazon seller, the easiest bookkeeping is done by using Xero + A2X or QuickBooks Online + A2X.
@@AcuityEcommerce so basically all funds still in my amazon account is still considered on the books for me, for cash accounting I guess it would be treated something along the signs of an asset/owned until its deposited in to my bank
If I receive a check for payment from my customer on December 28th 2022 and enter the payment into Quickbooks but don't deposit it until January 1st 2023 does it go towards 2022 or 2023 income?
It goes toward 2022 (when you received it). If you enter it into QuickBooks in 2022, it'll show as Undeposited Funds until you deposit the money in the bank. QB will therefore correctly show receipt in 2022. I'm aware there are a lot of people who will hang on to checks and record and deposit them in 2023 since there's usually no real proof of "constructive receipt," and this delays recognizing the money as income until the following year. That's not technically right, but... that happens.
i just watched this about 3 times. Thank you so much for the help understanding!
Glad it helped!
Really helpful video
Thanks!
Thanks for watching! (And sorry for the choppy video... I think my computer is overwhelmed... working on it for next time.) Are you using cash or accrual basis?
My CPA keeps pushing for me to use Cash Basis but with an Amazon Inventory intensive business I really feel I need to push for that accrual method.
Cash basis is easiest for small businesses to track and understand, but as I mentioned above, I think accrual is much more helpful for managing your business.
For cash accounting, if I make a business purchase on Aug 1st using my credit card for $100, and pay off my full credit card balance of $500 on Sep 1st via bank transfer, how would I record these transactions in my bookkeeping?
Cash accounting is recorded when cash enters or leaves my business. Would I still not record when transactions transpire in my bookkeeping such as my Aug1st purcahse for $100? How would the above scenario play out?
Transaction of $100 (expense) recorded on 8/1. Paying off your credit card balance is just shifting cash around on your balance sheet, so there's no impact to your Profit & Loss Statement. The other $400 would've been recorded/expensed whenever those charges were made.
As an amazon seller, any major drawbacks of using cash accounting? Ill be using waveapps for bookkeeping. Just want to keep bookkeeping as simple as possible. Still not sure if sales made on amazona and in my account balance are considered "cash" or when amazon transfers it to my bank.
Your customers are paying with a credit card, so you've made sales at the time the sale is made because that's when the money has been "constructively received." Same deal with checks... if you receive a check in the mail, you've received the money for cash purposes even though it's not in your bank account yet. There are a TON of people out there who do this wrong.
In my opinion, if you're an Amazon seller, the easiest bookkeeping is done by using Xero + A2X or QuickBooks Online + A2X.
@@AcuityEcommerce so basically all funds still in my amazon account is still considered on the books for me, for cash accounting I guess it would be treated something along the signs of an asset/owned until its deposited in to my bank
Exactly. It's sometimes called cash in transit or undeposited funds, and it's a current asset.
If I receive a check for payment from my customer on December 28th 2022 and enter the payment into Quickbooks but don't deposit it until January 1st 2023 does it go towards 2022 or 2023 income?
It goes toward 2022 (when you received it). If you enter it into QuickBooks in 2022, it'll show as Undeposited Funds until you deposit the money in the bank. QB will therefore correctly show receipt in 2022.
I'm aware there are a lot of people who will hang on to checks and record and deposit them in 2023 since there's usually no real proof of "constructive receipt," and this delays recognizing the money as income until the following year. That's not technically right, but... that happens.