The ACA (Affordable Care Act or Obamacare) was created to improve access to health insurance. The Act creates incentives for smaller small businesses to offer health insurance — and requires companies with more than 50 employees to provide health plans. Learn more about your requirements here.
Accounts receivable amounts owed by customers on account. Read more from accounting-financial-tax.com
Accrual Accounting with the accrual method, transactions are recorded when they occur, regardless of whether cash has actually exchanged hands. This method is typically practiced by companies that buy or sell a lot of products or services on credit. Most companies that sell inventory are expected to use the accrual method.
Accrued expenses expenses that occur but no payment is made during an accounting period, such as utility charges and wages. These expenses are shown as current (short-term) liabilities in the balance sheet and may also be referred to as accrued liabilities.
Adjusting journal entries this is the journal in which a business’s transactions are first recorded. This is where you can write everything down before you transfer the information into the ledger and categorize it at the end of the day or week.
Aging the accounts receivable the analysis of customer balances by the length of time they have been unpaid.
Allowance method a method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period.
Amended if you make a mistake on your tax return, whether the error is due to your business or personal taxes, you must file an amended return.
Asset an economic resource with anticipated benefits in the future, based on past events or transactions. An asset is anything of value to which the organization has a legal claim, including tangible and intangible objects of economic value. Read more from mediusflow.com
Assets any resource, tangible or intangible, that has value. Furniture, a building, computers, a business website
and cash in the bank are all considered assets. You may divide assets into subcategories:
- Current assets, or anything expected to generate an economic benefit to a company within the fiscal year
(e.g., cash, inventory, undeposited customer checks, prepaid expenses).
- Fixed assets, any asset that isn’t expected to be converted to cash within the fiscal year (e.g., equipment,
buildings, computer software, vehicles).
Average collection period the average amount of time that a receivable is outstanding; calculated by dividing 365 days by the accounts receivables turnover ratio.
Bad Debts Expense an expense account to record uncollectible receivables.
Balance sheet a summary financial report stating the organization’s assets, liabilities, and shareholder or owner equity at the time of the report. Assets = Liabilities + Equity.
Balance Sheet or statement of financial position: A balance sheet is a snapshot that shows your financial position at any point in time. It is one of the most important financial statements your business will deal with. It provides an overview of where your business stands financially, showing you what you own and what you owe. It is a record of all of your company’s assets, liabilities and equity. The balance sheet is best understood through
this equation: Assets = liabilities + equity In other words, what you have (assets) should equal what you owe (liabilities) plus what you own (equity). To put it still another way: If you subtract what you owe (liabilities) from what you have (assets), what’s left is the value of what you own (equity).
Bank Reconciliation the process of ensuring that the numbers in a organization’s records match the bank statement balance. Any differences between these two amounts require looking into. Discrepancies could be from errors made by the account holder or the bank, a deposit that hasn’t been cleared (outstanding deposit), or a deposited check that has been returned by the bank. Bank reconciliations should be performed regularly to ensure that records are accurate and to safeguard against fraud.
Base pay rate the rate that has been agreed upon to be the starting point for employee earnings. This can be an hourly rate, a daily rate, a piece rate, or salary per pay.
Bonus an amount of money an employee receives that’s beyond their normal wages. Bonuses can be used to recognize great work, celebrate achievements, or otherwise reward employees.
Bookkeeping the act of recording all of an organization’s financial transactions in chronological order. For example, have you recently purchased a new point of sale system? That has to be recorded in your books along with the amount that you paid. Did you just make a sale? That has to be recorded in your books. To gauge your company’s performance and success, you must track all of the money that is coming in, and all of the money that is going out. You do that with bookkeeping.
Book Value the value of an asset based on the original cost of the asset less any depreciation, amortization or impairment costs made against the asset.
business tax deductions business expenses are usually deductible if the business is operated to make a profit. Many don’t take advantage of these deductions:
- Healthcare tax credit.
- Business use of personal vehicle.
- Business travel and entertainment expenses.
- Home office deduction.
- Start-up costs.
- Professional fees and training costs.
- Equipment and software purchases.
- Moving costs.
- Hiring veterans.
- Charitable donations.
Capital wealth in the form of assets or cash that show the financial strength of the organization, and the money can be used for development or investment in a business to generate income.
Cash Basis Accounting in cash accounting, sales are only reported when cash has been received and expenses are only recognized when the cash is paid out. This method is primarily used by very small businesses and in personal finances.
Cash(net)realizable value the net amount a company expects to receive in cash.
Cash flow the incoming and outgoing of cash disbursements and receipts which represent the operating activities of a company. Cash flow represents the difference in the amount of cash available at the start of a period (opening balance) and the amount at the closing of the period (closing balance). When the closing balance is higher than the opening balance, it is called positive, and the reverse is negative.
cash flow statement (or) statement of cash flows this financial statement reports the major changes in a corporation’s cash and cash equivalents. Amounts are grouped according to operating, investing, and financing activities.
Chart of Accounts a coded listing of all accounts in the general ledger that serves as the organizational tool for all of finance, commonly divided into subcategories this listing of the general ledger accounts does not include the account balances or other amounts.
Compensation is a term that is often used instead of using the term “pay,” but it is a more general term that includes other payments to employees. Some other types of employee compensation that are taxable to the employee include: Quarter & Year End Payroll Requirements.
corp a corporation with no more than 35 shareholders that files taxes yearly, not quarterly, and isn’t subject to double taxation.
corporation a company or group of people authorized to act as a single, legal entity.
Cost of goods sold (often referred to as COGS) the figure that represents the cost of purchasing raw materials used to produce the finished goods being sold by a business. In retail, the cost of goods sold is the purchase price of the merchandise. It can also be referred to as the cost of sales.
Commission usually tied to sales and marketing positions, a commission is typically a percentage of the value of the goods or services sold, or a flat rate based on volume.
Contingent Liability liabilities not recorded in the financial report due to the uncertainty of future events.
Contract employees are responsible for paying their own income taxes at the end of the year as the employer does not withhold taxes from their pay.
Corporation Income Tax all corporations and entities taxed as corporations for federal income tax purposes deriving income from Louisiana sources, whether or not they have any net income, must file an income tax return. Corporations that obtain a ruling of exemption from the Internal Revenue Service must submit a copy of the ruling to the Department to obtain an exemption.
credit this term indicates the right side of a general ledger account. It is also the normal balance for liability, stockholders’ equity, revenue, and gain accounts.
Current assets will convert to cash within one year, such as inventory, accounts receivable, or cash.
Current Liability amount owed that needs to be paid or settled, usually within a year.
Days payment outstanding (DPO) payable an organization’s average payable period that measures the length of time it takes for a company to pay its invoices from suppliers and other trade creditors. DPO is also referred to as the number of days.
Debit this term indicates the right side of a general ledger account. It is also the normal balance for liability, stockholders’ equity, revenue, and gain accounts.
Deductions are amounts taken from the employee’s paycheck (not to be confused with taxes). These can be voluntary amounts that the employee chooses, such as health insurance premiums, retirement plan contributions, and miscellaneous deductions, or involuntary deductions, such as a child support order or a tax garnishment. These items can be considered pre-tax or post-tax, depending on the actual deduction.
Depreciation the allocation of a company’s asset’s cost to expense over the accounting periods that the asset is likely to be used. The amounts can vary based on the method and assumptions. this is the allocation of a plant asset’s cost to expense over the asset’s useful life. The purpose is to match the asset’s cost to the years that benefit from its use.
Direct write-off method a method of accounting for bad debts that involves expensing accounts at the time they are determined to be uncollectible.
Diversification occurs when a business enters a market or industry different from its core enterprise to reduce the risk of relying on a singular source, avoid seasonal or fluctuations and cyclical demand cycles, become more competitive with related industry, and promote a faster growth rate of the organization.
Double Entry type of bookkeeping system in which every transaction is recorded in at least two accounts using a debit and a credit. Every transaction is recorded in a formal journal as a debit entry in one account, and as a credit entry in another account. Periodically, usually monthly, the summarized balances from the journals transferred to a formal business record called the general ledger.
double-entry accounting (or) double-entry bookkeeping under this system every transaction will result in an amount recorded in at least two general ledger accounts. It also requires that the amounts recorded as debits must be equal to the amounts recorded as credits.
EFTPS This stands for the Electronic Federal Tax Payment System. It’s used by employers and individuals to pay estimated or due federal taxes online.
EIN Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity.
E-invoice/AP workflow formally referred to as an electronic invoice, an e-invoice is sent electronically via the Internet and can be integrated into the organization, supplier, and/or customer’s accounts payable system The integrated electronic invoice document is typically between a buyer and supplier, and eliminates the need for paper-based invoices.
Employee’s Withholding Allowance Certificate (W-4) federal Form W-4 is where the employee states the number of withholding allowances claimed to determine income taxes to withhold from the employee’s compensation.
Estimated Liability like contingent liabilities, estimated liabilities are expenses that are not yet reported in the financial statements but are absolutely owed due to unquestionable future delivery of goods or services (such as electricity bills or property taxes).
Estimated taxes many small business owners must pay estimated taxes because they don’t earn a salary, so no taxes are withheld from their income or self-employment. Estimated taxes are due quarterly: April 15, July 15, October 15, and January 15 of the following year.
Exception/deviation a situation where the invoice data deviates from the contractual document, purchase order or goods delivery receipt associated with the purchase. Deviations may occur when the unit cost of goods is different from what is stated on the purchase order (price deviation) or when the number of goods invoiced does not match the number delivered and reported on the GDR (quantity deviation). In these cases, the relevant individual in the buying organization will need to investigate the reason for the deviation. When an AP automation solution is in place the system can identify the deviating invoice rows and automatically send a notification to the buyer for further investigation.
Expenses costs incurred or money spent on a company’s efforts to earn revenue, which represent the cost of conducting business.
Federal Income Tax and Social Security and Medicare Taxes you generally must withhold federal income tax from your employees’ wages. You withhold part of social security and Medicare taxes from your employees’ wages, and you pay a matching amount yourself.
Federal Unemployment (FUTA) Tax: you report and pay FUTA tax separately from federal income tax, and social security and Medicare taxes. You pay FUTA tax only from your own funds. Employees do not pay this tax or have it withheld from their pay.
Federal Unemployment Tax Act (FUTA) and state unemployment taxes: while some organizations or positions may be exempt from these particular taxes, FUTA helps cover the costs of unemployment insurance (UI) as well as state-run job programs. These taxes are usually based on employees’ gross earnings, meaning they aren’t withheld from their wages. Instead, they are an additional obligation that employers must cover.
FICA the acronym stands for Federal Insurance Contributions ACT. It is the formal name for the combination of Social Security and Medicare Taxes. Employers are responsible for remitting FICA and Federal Income Tax (FIT) together in a payment known as the federal tax liability. This is reported on the quarterly form 941.
Fixed assets long-term that may provide benefits to the organization for over a year, such as equipment, real estate, large machines or land.
Fixed expenses costs that are constant in a defined time period, volume, or range of activity. Non-cash items are not included, such as depletion and depreciation.
Form 941 (Quarterly) this IRS form summarizes wages paid and is used by employers whether they are tax exempt or not. Every quarter the employer will report the amount of federal payroll taxes withheld, social security taxes, medicare taxes, and any other related payments and/or withholdings.
Form 940 (Annual) (Quarterly) this IRS form is utilized by employers to report wages paid and Federal Unemployment Taxes that were accrued on those wages subject to FUTA for the entire year.
Form 1040 is used by U.S. taxpayers to file an annual income tax return. Read more from IRS.gov
Garnishment a legal proceeding authorizing an involuntary transfer of an employee’s wages to a creditor to satisfy a debt.
General Liability insurance
Generally Accepted Accounting Standards (GAAP) relevance, and reliability a set of standard rules that aim to make all company financial reports easy to understand and comparable across different companies. These rules are based on basic concepts such as the cost principle, matching principle, full disclosure, going concern, economic entity, conservatism, relevance, and reliability
Gross pay is the total pay received by the employee before taxes and deductions are removed. This includes the base pay plus any additional earnings (ex. bonuses, vacation pay, commissions, etc).
hourly employees gross pay is the worker’s hourly rate times the number of hours worked in that pay period; overtime is included in gross pay, too.
I-9 this is a form used to verify if an employee is legally eligible to work in the United States. The company has 3 days from the date of hire to complete the form.
Income Tax is a tax that only employees pay. Federal Income tax, state income tax, and local income tax are all possible. The amount withheld is calculated on the W-4 or L-4 forms submitted when onboarding. Not all locations will have state or local taxes.
income statement see profit and loss statement.
income tax all businesses except partnerships must file an annual income tax return. Partnerships file an information return.
Integration the connection of two or more systems in order to enhance the functionality of an existing process or system. For accounts payable automation, an integration makes it possible to transfer master data
(such as suppliers, accounts, etc.) from the ERP(s) to the AP automation solution, and conversely return invoice data from the solution the other direction. Often, a pre-packaged integration standardizes this connection to accelerate onboarding and reduce the expected workload from an organizations technical resources, particularly so when the automation solution is cloud-based.
Inventory is a cylindrical fastener designed for the IBC and Tote Tank industries.
Invoice data capture scanning software is used for invoice data capture so suppliers can submit invoices digitally, or in their chosen format, and an organization can digitize and import the data into a uniform format, eliminating the need to enter invoice information manually. The result is a paperless accounts payable process with improved data quality by reducing the risk of data entry errors. Capture software may be used to validate invoice details per an organization’s pre-defined rules or requirements.
Invoice/AP workflow formally referred to as an electronic invoice, an e-invoice is sent electronically via the Internet and can be integrated into the organization, supplier, and/or customer’s accounts payable system The integrated electronic invoice document is typically between a buyer and supplier, and eliminates the need for paper-based invoices.
Invoice matching the comparing and linking of a supplier invoice with the underlying data on which the cost is based, such as a contract or purchase order and goods delivery receipt (GDR). Matching invoices manually is time-consuming, especially on a line level where each invoice row need to be connected, sometimes to multiple purchase orders, and verified. AP invoice automation handles a significant portion of the invoice matching in an automatic workflow, using intelligent matching technology and pre-set business rules. Deviations are automatically identified and send to specific personnel for review and a decision.
Job Application Form there are several forms that need to be completed by the employee at their time of hire.
Liability an obligation arising from a past business event.
Liabilities Current liabilities debts, loans, trade credit or other obligations due for payment within one calendar year.
Limited liability company (LLC) a type of business that protects its owners, also known as members, from certain types of legal liability.
local taxes Read more at Louisana.gov
Maker the party in a promissory note who is making the promise to pay.
Margin this term is short for profit margin, a measure of how much money your business makes. There are two forms of this: gross profit margin and net profit margin. Gross profit margin is the profit you made before the cost of goods or services is subtracted from revenue. For example, if you bought a T-shirt from your supplier for $5 and sold it to a customer for $12, your gross profit margin is $7. On the other hand, net profit margin is the profit you have after accounting for all of your expenses and costs. In the same T-shirt example, assume you spent an additional $5 in expenses related to acquiring, inventorying, marketing and selling the shirt. Your net profit margin, then, is $2 ($12 sale, minus $5 to acquire the shirt, minus an additional $5 to cover labor and expenses). Your net profit margin is the best way to determine if your business is making or losing money For service businesses, calculate gross margin by subtracting the hourly labor cost of the person providing the service from the price of the service. For example, if a plumber on your staff earns $75 an hour, and spends one hour fixing a broken pipe that you charge $200 to repair, your gross profit margin is $125. To calculate your net profit margin, factor in the cost of parts, supplies and operational expenses related to this broken pipe repair.
Minimum Wage Requirement
New Hire Forms there are several forms that need to be completed by the employee at their time of hire.
Net income the excess or deficit of total gains and revenues as compared with total losses and expenses for an organization during a specific accounting period. Also referred to as earnings, net profit, and net earnings.
Net pay the employee’s take-home pay. This is the amount the employee receives after taxes and deductions are calculated and subtracted from earnings.
Net Working Capital simply put, net working capital (NWC) is the difference between a company’s current assets and its current liabilities. This is a key measurement of a company’s overall health, liquidity, and efficiency, as it reflects metrics from a number of company activities.
Off-cycle payroll a payment that happens outside of your normally scheduled pay period, such as a one-time bonus or paying a contractor’s invoice.
Open Invoice Amount summary of the current status of charges or invoices that are currently due to be paid by a company and are awaiting further action in order to be posted to the ERP for payment.
overtime additional amounts paid to hourly employees who work over 40 hours in a week, who work on weekends, or other additional amounts. The federal minimum overtime requirement is that overtime must be paid at 1 1/2 times pay rate for employees who work more than 40 hours in a work week. Of course, you can pay overtime at higher rates.
partnership a business with two or more owners who manage and operate the business as partners.
Payroll the act of compensating employees for the work performed in a period.The financial records of a company relating to the payment of wages and salaries to employees The total record of earnings of all employees for a year.
Pay Period a recurring length of time over which employee pay is recorded and paid. Some common pay periods are monthly, weekly, bi-weekly (every other week) and semi-monthly (twice a month).
- Weekly – 52 pay periods / year. Bi-weekly – 26 pay periods / year.
- Semi-monthly – 24 pay periods / year.
- Monthly – 12 pay periods / year.
A weekly pay period results in 52 pay periods in a year.
A bi-weekly pay period results in 26 pay periods in a year, while semi-monthly pay results in 24 pay periods in a year. The difference is important in computing total pay for employees for a year.
Payee The party to whom payment of a promissory note is to be made.
P&L formally known as a profit and loss statement, is the financial statement summarizing costs, expenses, and revenues for a specific period of time, typically a year or fiscal quarter. Like the income statement, the P&L shows an organization’s ability or inability to generate provide by reducing costs, increasing revenue or both. The P&L statement is also referred to as a statement of operations or earnings statement.
Promissory note a written promise to pay a specified amount of money on demand or at a definite time.
Purchase order also referred to as a PO, a purchase order is a document generated by a buyer that authorizes a purchase transaction. When the seller accepts the PO, it becomes a binding contract on both parties that outlines the descriptions, prices, quantities, discounts, payment terms, date of shipment or performance, and other terms and conditions related to the transaction between the buyer and a named seller.
Quarter & Year End Payroll Requirements this IRS form summarizes wages paid and is used by employers whether they are tax exempt or not. Every quarter the employer will report the amount of federal payroll taxes withheld, social security taxes, medicare taxes, and any other related payments and/or withholdings.
Qualified Joint Venture
Receivables amounts due from individuals and other companies.
Reimbursements when employees spend their own money on work-related expenses, you can pay them back by adding reimbursements to their paycheck. Since reimbursements aren’t income an employee has earned by working, they aren’t typically taxed (but there are a few exceptions).
revenue this is the money your business brings in from selling and delivering its products or services during an accounting period. Revenue is often referred to as your “top line,” because it’s the first item listed on a profit and loss statement
revenues under the accrual method, these are reported on the income statement when they are earned. Sales and fees earned are examples.
salaried employees gross pay is stated as an annual amount. To determine gross pay for a pay period, the annual salary is divided by the number of pay periods in the year.
Sales Tax he state general sales tax is payable by users, consumers, lessees, and persons receiving services taxable under the law. If a seller or lessor qualifies as a dealer under the definition of the term at R.S. 47:301(4), they must apply for a sales tax certificate, collect the proper taxes from customers, and file returns with the Louisiana Department of Revenue. A seller or lessor will qualify as a dealer subject to tax collection requirements if they lease, rent, or sell tangible personal property in the state, furnish services in the state that are taxable under the statute, hold property in the state for resale, maintain a business location in the state, operate in the state through full-time or part-time resident or nonresident salesmen or agents, maintain an inventory in the state of tangible personal property for lease or rental, or deliver in a vehicle owned or operated by the seller.
schedule c income forms
s corp a corporation with no more than 35 shareholders that files taxes yearly, not quarterly, and isn’t subject to double taxation.
schedule se for self employment Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves.
Self-Employment (SE) Tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.
Social Security (OASDI) is both an employee withholding tax and an employer payroll tax. The employer is responsible for remitting a total of 12.4% of an employee’s taxable earnings to the IRS. They are permitted to take 6.2% from the employee as a withholding tax and “match” the other 6.2% as a payroll tax. There is a wage base limit, which means that the tax stops at a certain amount of wages for the year. This varies per year. For 2017, the limit is $127,200.
sole proprietor (sole proprietorship) a business owned by an individual who earns all the profits and is entirely responsible for taxes and other business-related financial obligations.
state general sales tax is payable by users, consumers, lessees, and persons receiving services taxable under the law. If a seller or lessor qualifies as a dealer under the definition of the term at R.S. 47:301(4), they must apply for a sales tax certificate, collect the proper taxes from customers, and file returns with the Louisiana Department of Revenue. A seller or lessor will qualify as a dealer subject to tax collection requirements if they lease, rent, or sell tangible personal property in the state, furnish services in the state that are taxable under the statute, hold property in the state for resale, maintain a business location in the state, operate in the state through full-time or part-time resident or nonresident salesmen or agents, maintain an inventory in the state of tangible personal property for lease or rental, or deliver in a vehicle owned or operated by the seller.
State Unemployment Taxes most employers pay both Federal and State unemployment taxes.
Tax deductions costs you can deduct to reduce your taxable income.
Tax identification number (TIN) an employer identification number that’s used to identify a corporation for tax purposes.
Taxable income: your total gross income minus exemptions and deductions.
Taxable wage base the maximum amount of employee compensation subject to Social Security, FUTA and state unemployment insurance taxes.
Time Sheet a method should be used to track each employee’s time for when they clock in and out of work, for lunch and any personal time off taken during the work day. This is especially important for hourly employees as their hours worked is used to calculate their regular pay as well as any overtime. There are two common methods for collection an employee’s time, which include;
Touchless invoice processing human handling no manual input is necessary from the time the invoice arrives at an organization to the time it is posted to the ERP for final booking and payment. Touchless invoice processing is possible when the invoice is automatically matched against a supporting document, such as a goods receipt and purchase order or contract, and sent for payment without any
Variable expenses a cost that changes in proportion to the changes in measures of volume or productive output, which can be traced to specific expenses such as product, process, or department. Also known as variable cost and direct expense.
W2 every employer engaged in a trade or business who pays remuneration, including non-cash payments of $600 or more for the year (all amounts if any income, social security, or Medicare tax was withheld) for services performed by an employee must file a for each employee (even if the employee is related to the employer) from whom: Income, social security, or Medicare tax was withheld. Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee’s Withholding Allowance Certificate. Read more about your W2 at IRS.com
W2 Form furnish W2’s to your employees prior to the deadline. You’ll need to file W2 forms with the Social Security Administration by either E-filing and/or filing the actual forms.
Withholding Tax every employer who has resident or nonresident employees performing services (except employees exempt from income tax withholding) within Louisiana is required to withhold Louisiana income tax based on the employee’s withholding exemption certificate. Wages of Louisiana residents performing services in other states are subject to withholding of Louisiana income tax if the wages are not subject to withholding of net income tax by the state in which the services are performed.
Withholding subtract amounts from an employee’s wages for taxes, garnishments or other deductions. These amounts are paid over to the government agency or other party to whom they are owed.
Work Week is considered as 168 consecutive hours of work in a seven-day period. This term is used in calculating overtime for hourly and some salaried employees.