A/P invoices are normally recorded on an accrual basis (i.e. invoices are recorded to the G/L prior to them being paid). Since it is necessary to post invoices prior to them being included in an Oil and Gas Billing, Pak Accounting has come up with a Cash basis A/P. After turning on this option (Company Options), the system automatically dates the invoices with an effective date of 12/31/9999 when they are initially entered. When the invoices are paid the system will automatically redate all the entries associated with the invoice to the check date. |
Accrual Basis - Revenue and expenses are recorded in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period.
Cash Basis - Accounting basis in which revenue and expenses are recorded in the period they are actually received or expended in cash.
A/ P invoices are normally recorded on an accrual basis (i.e. invoices are recorded to the G/L prior to them being paid) since it is necessary to post invoices prior to them being included in an Oil and Gas Billing. Pak Accounting has a Cash basis A/P. After turning on this option (Company Options), the system automatically dates the invoices with an effective date of 12/31/9999 when they are initially entered. When the invoices are paid the system will automatically redate all the entries associated with the invoice to the check date. Accounts Payable Reverse Unpaid Invoices gives the ability to create reversing entries for Unpaid A/P and/or unpaid A/R into an elimination company that would be included in either a consolidation or combined company, must be licensed for Consolidation or Combined to use this feature.
Investor Entries The Oil and Gas Revenue/Billing Cycle update will create G/L entries for the selected owner(s) on either an accrual (production run date) or cash (check date) basis. A different option can be defined for each owner (Investor Entries).
This is to be a one-time event. If needing to accomplish on a more frequent basis, contact Sales for information on the Consolidation Add-On. ***Changing from Cash basis to Accrual basis
2. Print a Ledger listing of the A/P account for the date range 12/31/9999 to 12/31/9999, to make sure there are no outstanding transactions. If outstanding transactions exist, they will automatically be changed to their actual invoice date, once you have completed Step 3.
***Changing from Accrual basis to Cash basis
2. Print an Accounts payable Open item report using "Display All Invoices" option.
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Cash flow refers to the money that comes in and goes out of a system. Money coming into a system is referred to as income and is categorized as sales (of goods and/or services) (Costa, 2008). However, income can be generated from other sources as well. Income is recorded in the system as a deposit in the Deposit Entry module or in the Check Stub module. Expenses are generally recorded in the Accounts Payable module. The overall goal of cash flow is that it remains positive meaning that there is enough money to pay the bills (expenses) and have money left over. Managing cash flow is a form of budgeting. The system provides the ability to create a budget (located in Budget Maintenance in the General Ledger module) for income and expense accounts and to run reports comparing budget amounts to actual amounts.
Works Cited |
A calendar year refers to annual bookkeeping beginning on January 1 and closing on December 31 of the same year. A fiscal year refers to annual bookkeeping beginning on the first day of any desired month and ending twelve months later on the last day of that month (Costa, 2008) . Pak Accounting allows a company to be set up as a calendar year or fiscal year company in the General Ledger module, #80-Company, Company Options, General Info tab. Select January for a company to be set up on a calendar year. For fiscal year, select the first month of the fiscal year. Additionally the maximum periods per fiscal year must be entered. The normal setting is 12 for calendar or fiscal years. However, there are some organizations that operate on a thirteenth period fiscal year (four week fiscal year). The systems honors this concept by simply entering the number 13 in this field. Works Cited Costa, C. (2008). Alpha Teach Yourself Bookkeeping in 24 Hours. New York: Penguin Group. |
Bookkeeping requires that every transaction posted have debits and credits of equal value that will balance out to zero. Debits are plus (+) amounts and credits are minus (-) amounts. Every transaction posted as a debit to one account must also contain a credit to another account. This comprises the concept for double-entry bookkeeping (Costa, 2008). Pak Accounting requires each transaction to have a debit and credit entry that balances out to zero. If the entry does not balance to zero, the system will not allow it to post to the General Ledger. See Entering Journal Entries.
Example of a transaction as seen through View Trend (F4).
NOTE: As stated above, the bookkeeping/accounting world views debits as and addition to the account and credits as a subtraction to the account. The banking world is the opposite. Additions to an account are known as credits and subtractions from an account are known as debits. This is because the money coming into the bank is considered income and the money that goes out of the bank is considered an expense (Costa, 2008). Works Cited Costa, C. (2008). Alpha Teach Yourself Bookkeeping in 24 Hours. New York: Penguin Group. |
Beginning balances are those account balances that are entered and posted in a current period from the prior period. When you are first creating a company in Pak Accounting that has been in business previously, it will be necessary to have a conversion completed that will bring in the beginning balances. However, these entries can be made manually if conversion services are not desired. This would be accomplished in the General Ledger module/Entries. If the company is a brand new company that is just "starting up," the beginning balances will be minimal (cash, capital, etc.). At the end of the financial year for your company, Pak Accounting will automatically roll the account balances forward to the beginning of the next financial year. |
How an entity is structured is a deciding factor in how it will be taxed for income tax purposes.
Various Ways a Company can be Structured:
Sole Proprietor: This is generally a small business run by one or two people. Net income/loss is reported on the personal tax returns of the owner(s).
Partnership: A partnership is a business relationship between two or more individuals that contribute to the business (money, time, skills, property, labor) in order to share in the profit or losses. The IRS considers a partnership one entity and assigns it an EIN. The profit or loss is passed through to the partners and reported on their personal income taxes.
Corporations: A corporations is a business that has shareholders that are considered owners of the company and will receive dividends. Taxes are based on the corporate rate structure.
S Corporations: This is a corporation that is smaller than a regular corporation. This business structure is not subject to the same tax liabilities as a regular corporation is and personal liability is avoided as well. Profits and losses are passed through to the stockholders.
Limited Liability Corporations (LLC): This is a structure whose members can be individuals, corporations, or other LLCs'. The benefit of an LLC is that the liability is limited to the organization. Works Cited Costa, C. (2008). Alpha Teach Yourself Bookkeeping in 24 Hours. New York: Penguin Group. |