How to Set Up Ledger Accounts for Employee Expenses

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Setting up ledger accounts for employee expenses is an invaluable skill to have for the small business owner. Set up ledge accounts for employee expenses with help from a real estate and mortgage professional in this free video clip.

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Video Transcript

Hello there, this is Sidney Potter with Potter Equities in Pasadena, California, thank you for your time, I'm very appreciative. I've been asked to comment momentarily on, how to set up a ledger accounts for your employee expenses. If you're a small practitioner, such as I am, I'm in the real estate industry, you'll want to set something like an expense ledger. Either it be one, sole practitioner yourself, or it be several employees. First thing I would own, or rather suggest, because it is rather complicated, and it shouldn't be complicated, but it's very necessary, in terms of allocating, having your expense allocation correct for tax reporting purposes. And the last thing you'd want to do is get hung up on details, since it should be really something that's secondary, and your concentration should be growing your business, to even be larger and more successful. So, first and foremost, I would recommend these particular three softwares, Quickbooks is a great one, Account Edge, Net Suite, all wonderful, all user-friendly, in terms of setting up your ledger account for employee expenses. And when you do that, you're essentially putting these expenses in separate little buckets, that way at the end of the year it all inks out nice and pretty. First item in terms of tips for ledger accounts. Keep in mind that your typical numerics schematics for your employer ledger account will be 1000-999, that would typically be for assets, you'll have 2000-2999, that would typically be for liabilities, and for owner's equity, that's usually the numeric value of 3399, that is your typical scenario schematic on setting up ledger accounts. The second item here, you'll have to look at your individual expenses for your businesses. Now in terms of those expenses, you'll look at regular expenses. Regular expenses would be on the monthly, the quarterly and annually. Then in addition to regular expenses, you'll have variable expenses. Variable expenses are defined as non-reoccurring expenses, that could be for travel that is very sudden, it could be for car repair. Lets say you've got a small fleet of vans because you've got a small plumbing business for example. Segregating those expenses is actually vitally important. The third item, fairly important in terms of setting up your expense ledger accounts in these separate little buckets here, would be specialize subcategories. Now subcategories are with, are at rather a micro level instead of a macro level. Subcategories, for example, could include, rent. Most of these softwares that I had mentioned a moment ago will give an allocation, numeric allocation for rent, to let's say for example the 8100 numeric value. You may have another subcategory that is typically 8200, which might include utility, then you'll have another subcategory that's called 8300 for Internet, web-based, web-master type of repair. What you'll want to do is delineate those specifications in terms of those expenses, that way, once again, not to be repetitive, they go in a nice pretty bucket and it makes it very easy for your CPA, your EA enrollment agent in which to work those in aggregation and figure out your expenses. To recap, and very quickly, and this being done all three items above, you want to delineate these expenses for the purposes of your accounting or EA, categorizing those amounts correctly, and to most, importantly, rather, and this is what I really wish to say, to not be ducative, being ducative is a quick way to an audit very quickly. And the last thing you'd want to do is actually err. So in closing, software that I would recommend would be Quickbooks, Account Edge, Net Suite. Those are fairly user-friendly. I think once you get familiarized with those, because it's in a Microsoft Word based setup, not DOS, it should be fairly easy to follow. Once again, this is Sidney Potter with Potter Equities in Pasadena, California. I thank you for your time, and I will see you at the finish line.


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