8 Benefits of Account Reconciliation

Reconciliation in accounts offers several benefits that are crucial for the financial health and operational efficiency of a business:

1.) Accuracy in Financial Records: Account reconciliation ensures that financial statements are accurate and reflect the true financial position of the business. This accuracy helps in making informed decisions and planning for the future.

2.) Fraud Detection and Prevention: By regularly reconciling accounts, businesses can identify discrepancies that may indicate fraudulent activities or errors, allowing them to take corrective measures promptly.

3.) Regulatory Compliance: Accurate and timely reconciliation in accounting helps businesses comply with regulatory requirements, reducing the risk of penalties and legal issues.

4.) Cash Flow Management: Account reconcilement helps monitor cash flow by ensuring that all transactions are recorded correctly and that there are no unexpected shortfalls or overages.

5.) Enhanced Financial Planning: With precise financial data, businesses can create more reliable budgets, forecasts, and financial plans, aiding in strategic decision-making.

6.) Improved Operational Efficiency: Automating the account reconciliation process can save time and reduce manual errors, allowing the finance team to focus on more strategic tasks.

7.) Increased Stakeholder Confidence: Accurate and transparent financial records enhance trust and confidence among investors, creditors, and other stakeholders.

8.) Internal Control: Regular account reconciliation is an internal control measure that ensures all transactions are authorized and recorded correctly.

What Does Reconciling an Account Involve?

Account reconciliation is typically performed after the close of a financial period. Accountants review each account in the financial statements and verify that the balance listed is accurate. This often involves comparing the financial statement balance to another source of information – for example, comparing the balance for the Cash account to an external bank statement.

Other examples of critical accounts that require reconciliation include:

• Cash and Investments – comparing to external bank and investment accounts
• Accounts Receivable – comparing to the AR sub-ledger
• Accounts Payable – comparing to the AP sub-ledger
• Prepaid Expenses – listing the components of the account balance
• Accrued Liabilities – listing the components of the account balance
• Intercompany Payables and Receivables – ensuring they eliminate during consolidation
• Fixed Assets – listing the components or tying out to a sub-ledger

Account reconciliation is performed to ensure consistency and accuracy in financial reporting. They are especially important and a key internal control for publicly held companies that must report financial results to external stakeholders. Source

Happy Thanksgiving!

 

Happy Thanksgiving from all of us at Powers Bookkeeping Service, Inc to you! 

We hope you have a blessed holiday!  We are thankful for you!

Powers Bookkeeping Service, Inc

(916) 302-9153

info@powersbookkeepingservice.com

Why You Should Start Investing with a Small Amount

You don’t need a fortune to begin building wealth. What matters most is starting early and being consistent. Even small investments grow through compound interest, where your money earns returns, and those returns earn more returns over time.

Example: If you start with $100 and invest $50 a month at a 7% return, you could have over $25,000 in 20 years. That’s the power of consistency.

Step 1: Open an Investment Account

Before you buy anything, you’ll need a place to invest. Here are your main options:

• Brokerage Account → Best for flexibility. Lets you invest in stocks, ETFs, and funds.
• Robo-Advisor → Automated investing, great for beginners who want hands-off growth.
• Retirement Accounts (IRA or 401k) → Tax advantages for long-term investing.

For beginners, a low-cost brokerage or investing app is the best choice. Look for one that offers:

• Fractional shares (so you can invest in big companies with just a few dollars)
• Low or no trading fees
• No minimum balance requirements
• Popular beginner-friendly investing platforms: Fidelity, Vanguard, Charles Schwab, Robinhood, Betterment, Acorns.

Step 2: Choose Your First Investment (ETFs, Index Funds, or Fractional Shares)

With $100, you’ll want diversification—spreading money across many companies to lower risk. Here are three simple ways:

1. ETFs (Exchange-Traded Funds)

Great for beginners. One ETF can include hundreds of companies.

Popular options:

• S&P 500 ETF (SPY, VOO) → Invests in the 500 largest U.S. companies.
• Total Stock Market ETF (VTI) → Covers the entire U.S. stock market.

2. Index Funds

Similar to ETFs but structured as mutual funds. Low-cost, long-term growth.

3. Fractional Shares

If a stock costs $300+, you don’t need to buy the whole share. Many apps let you invest $5 or $10 into companies like Apple, Amazon, or Tesla.

Step 3: Build a Habit of Investing Consistently

The secret to growing wealth isn’t a one-time $100 investment—it’s the habit of investing regularly.

Here’s how to build consistency:

• Automate monthly deposits (even $25 makes a difference).
• Reinvest dividends automatically.
• Stay invested during market ups and downs—don’t panic-sell.

Over time, these small contributions snowball into serious money.

Step 4: Keep Learning and Expanding Your Portfolio

Once you’re comfortable investing with $100, you can branch into:

• Dividend Stocks → Companies that pay you regular income.
• Bonds → Lower-risk investments for balance.
• REITs (Real Estate Investment Trusts) → Exposure to real estate without buying property.
• Advanced Strategies → Like options trading (only once you’re experienced).
• Start small, stay consistent, and increase your knowledge as your investments grow.
• Final Thoughts: Start Investing Today with Just $100

You don’t need to wait until you have thousands saved—the best time to invest is now. With just $100, you can open an account, choose a beginner-friendly ETF, and start building wealth.

Here’s your action plan:

• Open an investment account (brokerage or app).
• Invest your first $100 in an ETF or fractional shares.
• Add small amounts every month.
• Be patient and let compound growth work for you.

Remember: It’s not about timing the market—it’s about time in the market. Your first $100 could be the start of financial freedom. Source

1099 Reminder

Now is the time to get the information from your vendors and payees if you need to issue them 1099s in January. 

Here is a link to a W9 to get the information you need.

End of Year Checklist

 

Prepare Your Books for Year-End and Tax Season with Powers Bookkeeping Service. As the year comes to a close, it’s the perfect time to make sure your books are clean, accurate, and ready for tax season. A little preparation now can save hours of stress later — and help you start the new year with confidence. Here’s your step-by-step checklist from Powers Bookkeeping Service: 1. Reconcile All Bank and Credit Card Accounts Make sure every transaction in QuickBooks (or your bookkeeping system) matches your bank and credit card statements through December. This ensures your balances are accurate before you close the books. 2. Review and Categorize All Transactions Double-check that income and expenses are in the correct categories — especially for deductible items like: Office supplies Mileage and travel Equipment purchases Business meals and professional services Proper categorization helps maximize deductions and minimize red flags during tax prep. 3. Record Owner Contributions and Draws If you’re a sole proprietor or partnership, make sure all owner withdrawals and contributions are properly tracked. This ensures accurate equity reporting and avoids confusion during tax filing. 4. Review Accounts Receivable and Payables Send reminders for any outstanding client invoices. Pay any vendor bills due before year-end. Keeping these clean helps present an accurate financial picture for taxes — and improves your cash flow going into the new year. 5. Verify Payroll and Contractor Payments Confirm all employee wages, benefits, and taxes are properly recorded. Gather W-9s from any contractors you paid over $600 this year — you’ll need them for 1099 filing in January. 6. Update Asset and Depreciation Records Log any new equipment or property purchases and provide documentation to your tax preparer. This helps ensure you receive all eligible depreciation and Section 179 deductions. 7. Review Business Subscriptions and Expenses Take stock of recurring charges or unused services — cancel or adjust anything you no longer need before the new year. 8. Run Year-End Financial Reports Generate key reports for your records and tax preparation, including: Profit & Loss Statement Balance Sheet Cash Flow Report These give you and your tax preparer a complete view of your business health. 9. Back Up Your Financial Data Save a secure copy of your accounting files and financial documents. Cloud-based systems often do this automatically, but it’s smart to have a secondary backup for peace of mind. 10. Schedule a Year-End Review Set up a time with Powers Bookkeeping Service to review your books, address any discrepancies, and ensure you’re fully prepared for tax season. Start the new year organized, confident, and tax-ready. Let’s make sure your books tell the full story of your business success. Year-End Business Bookkeeping Checklist Get your books ready for tax season with Powers Bookkeeping Service Reconcile all accounts – Match your bank, credit card, and loan statements through year-end. Categorize income & expenses – Ensure all transactions are properly labeled for tax deductions. Record owner draws & contributions – Keep equity balances accurate and up to date. Review accounts receivable & payables – Collect outstanding invoices and pay open bills. Verify payroll & contractor payments – Double-check records and gather W-9s for 1099 filing. Update assets & depreciation – Record new equipment or property purchases. Audit recurring expenses – Cancel or adjust unused subscriptions. Run key reports – Profit & Loss, Balance Sheet, and Cash Flow for year-end review. Back up financial data – Save secure copies of your records and accounting files. Schedule your year-end review – Meet with Powers Bookkeeping Service to ensure your books are clean, accurate, and tax-ready. Start the new year organized and confident! Contact us today!

QuickBooks Made Simple for Sole Proprietors!

Are you running your own business and feeling overwhelmed by bookkeeping?

Join Powers Bookkeeping Service for our QuickBooks Workshop for Sole Proprietors — a hands-on session designed to help you take control of your business finances with confidence.

You’ll learn how to:

• Set up and organize your QuickBooks account the right way
• Track income, expenses, and mileage efficiently
• Reconcile accounts and prepare for tax season
• Generate reports that help you truly understand your business performance

Whether you’re brand new to QuickBooks or just want to clean up your records before year-end, this workshop will give you practical tools and peace of mind.

Date of workshop will be determined soon. 

RSVP today by contacting Tina Mosier tina@powersbookkeepingservice.com 

Happy Veterans Day

 

"Your courage and dedication inspire us all. Thank you for standing strong and serving with honor."

 Powers Bookkeeping Service

(916) 302-9153

info@powersbookkeepingservice.com

What are Taxes?

Simply put, taxes are the sum of money paid to the government to collectively fund spending towards public goods and services. Taxes are used to fund things like schools, roads, and various public programs, such as Social Security and Medicare. Citizens and corporate entities are all required to pay taxes, be it at the federal, state, or local level. We pay taxes to the government and entrust them to accomplish these positive impacts on society while using our tax dollars in an efficient manner.

Governments may levy various types of taxes, each serving a different purpose. There are also varying degrees to which the average person may be subject to them:

Income-based taxes: Taxes that are reported and paid on the annual income tax filings with the Internal Revenue Service:

✔️ Income tax: A tax levied on the wages, salaries, investment income such as interest and dividends, or other forms of income an individual or household earns and receives.

✔️ Capital gains tax: A tax levied on profit from the sale of property or an investment.

✔️ Corporate income tax: A tax levied on the business profits of corporate entities.

Payroll taxes: Taxes paid on the wages and salaries of employees to finance social insurance programs. These taxes are withheld directly from your paycheck if you are a W-2 employee and paid through the income tax return if self-employed. They are made up of two components:

✔️ Social Security tax: A 6.2% tax on earned wages with funds used for social security benefits paid to those eligible.

✔️ Medicare tax: A tax of 1.45% on earned wages with funds used to pay for Medicare, Part A benefits.

Property taxes: Taxes based on the value of a property, paid by the property owner:

✔️ Real estate taxes: A tax based on the value of your home.

✔️ Vehicle/personal property taxes: A tax based on the value of your car, truck, boat, etc.

✔️ Consumption taxes: Taxes levied on the purchase of goods or services and is paid by the consumer:

✔️ Sales tax: A tax applied to retail purchases, set at a percentage of the total cost that is determined at the state and local level.

✔️ Tariff: A tax imposed by one country on the goods and services imported from another country.

Death taxes: Taxes imposed on a deceased’s estate:

✔️ Estate tax: A tax levied on the transfer of the estate of a person who dies.  An estate tax applies when the value exceeds an exclusion limit set by law.

✔️ Inheritance tax: A state tax that you pay when you receive money or property from the estate of a deceased person.

Source

The Benefits of Accrual Accounting

While accrual accounting is the more complex of the two accounting methods, it is considered the standard accounting practice for most businesses, except small businesses operating on an all-cash basis, and provides some distinct advantages:

• By using accrual accounting, companies can look at both current and expected cash flows, providing a much more accurate picture of the organization’s financial health.
• Accrual accounting shows underlying business transactions, not just those involving cash. Many transactions may be relatively straightforward, with payment received or made at the time of the transaction. Other transactions, which may be more complex, involve buying and selling on credit. This requires the company to account for monies that will be paid or received in the future.
• Accrual-based accounting is likely to be more accurate regarding a company’s assets or liabilities. Adhering strictly to a cash-basis system, a company’s accounting may leave out crucial information regarding unpaid invoices or liabilities, which could cause the omission, however unintentionally, of certain assets.
• The timing of when revenues and expenses are recognized can have a major effect on a company’s perceived financial health. One example of this can be found in the construction business, where a company may take on a long-term project and not receive cash payments until the project is completed. 
• Using the accrual method, a company would benefit from something called the percentage of completion method, in which the construction company mentioned above, for example, would recognize a percentage of revenue and expenses proportionately as the project was completed. In this case, the accrual method would show the prospective lender a more complete picture of the company’s revenue channel. 

Source

What Is a Chart of Accounts?

A chart of accounts (COA) is an index of all of the financial accounts in a company's general ledger. In short, it is an organizational tool that lists by category and line item all of the financial transactions that a company conducted during a specific accounting period. Large and small companies use a COA to organize their finances and give interested parties, such as investors and shareholders, a clear view and understanding of their financial health. Separating expenditures, revenue, assets, and liabilities helps to achieve this and ensures that financial statements are in compliance with reporting standards.

Here is a way to think about a COA as it relates to your own finances. Say you have a checking account, a savings account, and a certificate of deposit (CD) at the same bank. When you log in to your account online, you’ll typically go to an overview page that shows the balance in each account. Similarly, if you use an online program that helps you manage all your accounts in one place, like Mint or Personal Capital, you’re looking at basically the same thing as a company’s COA. You can see all your assets and liabilities on one page. There is no single format for a chart of accounts. Typically, they all follow the essential structure described below. But the final structure and look will depend on the type of business and its size.

COA Structure

The COA is typically set up to display information in the order that it appears in financial statements. That means that balance sheet accounts are listed first and are followed by accounts in the income statement.

These primary accounts of assets, liabilities, shareholders' equity, revenue, and expenses can then be broken down into sub-accounts such as operating revenues, operating expenses, non-operating revenues, and non-operating losses. In addition, the operating revenues and operating expenses accounts might be further organized by business function and/or by company divisions.

As an example, a small company COA might include these sub-accounts under the primary assets, primary liabilities, and primary shareholders' equity accounts:

Assets

• Cash
• Savings account
• Petty cash balance
• Accounts receivable
• Undeposited funds
• Inventory assets
• Prepaid insurance
• Vehicles
• Buildings

Liabilities

• Company credit card
• Accrued liabilities
• Accounts payable
• Payroll liabilities
• Notes payable

Shareholders' equity

• Common stock
• Preferred stock
• Retained earnings

Why Is a Chart of Accounts Important?

It is a very important financial tool that organizes a lot of financial transactions in a way that is easy to access. Because transactions are displayed as line items, they can quickly be found and assessed. This is crucial for providing investors and other stakeholders a bird's-eye view of a company's financial data.

Is There a Single COA Format?

Not precisely. A company can use, create, or modify any format that it wishes. But experience has shown that the most common format organizes information by individual account and assigns each account a code and description. What's important is to use the same format over time for the consistency of period-to-period and year-to-year comparisons.

Is a Chart of Accounts Required?

No, but it's considered necessary by all kinds of companies seeking to categorize all of their transactions so that they can be referenced quickly and easily. Source