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Welcome to the Cook and Company Accounting Department.
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Gregory J. Cook, EA, CPA+ Accredited Tax Advisor Past President Alabama Society of Enrolled Agents Past President Alabama Association of Accountants |
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Welcome to the Cook and Company Accounting Department.
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- Reconciling My Accounts in QuickBooks As you write checks, withdraw money, make deposits, and incur bank charges, each of these transactions should be recorded in QuickBooks and then "matched" with the bank's records.
- Printing Reports in QuickBooks Print the Trial Balance report for the day after the year that you just closed. This allows you to make sure that all income and expense accounts have a zero balance and are closed out to Retained Earnings.
- Closing My Books in QuickBooks You can choose whether to close your books at the end of the year or not. QuickBooks doesn't require you to do so.
- Adjust Retained Earnings in QuickBooks While you might adjust the Retained Earnings account to track funds withdrawn by, or distributed to, company owners, Intuit recommends that you create a separate equity account (commonly called Owner's Draw or Distributions) for these transactions.
- Daily Summary of Cash Receipts Accounting for "Petty Cash" manually. This summary is a record of cash sales for the day. It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day.
- Breakeven analysis involves estimating the level of sales necessary to operate a business on a breakeven basis.
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Generally, the sale price for a product or service will more than cover the variable costs of producing that product or service, but the margin from sales must be enough to cover fixed costs as well. By performing a breakeven analysis and then varying the assumptions regarding sales levels and variable and fixed costs, the real factors behind the profit potential (or lack thereof) of a business become more clear. This process will highlight the most significant factors and assumptions (particularly assumptions about the ability to set prices) in the buyer's business plan.
Calculating the Breakeven Point
The following steps are involved in calculating the breakeven point for a business.
Identify the total fixed and variable costs of the business based on actual results during a relevant time period.
Calculate the contribution margin, as a percent of sales as follows: Contribution margin = (Total sales - Variable costs) / Total sales
Calculate the breakeven point in dollars of sales revenue as follows: Breakeven sales revenue = Total fixed costs / Contribution margin
If contribution margin is expressed in dollars per unit, calculate the breakeven sales volume in units as follows: Breakeven unit volume = Total fixed costs / Contribution margin per unit
Key Breakeven Factors
Fixed Costs. These costs remain constant (or nearly so) within the projected range of sales levels. These can include facilities costs, certain general and administrative costs, and interest and depreciation expense.
Variable Costs. These costs vary in proportion to sales levels. They can include direct material and labor costs, the variable part of manufacturing overhead, and transportation and sales commission expenses.
Contribution Margin. This is equal to sales revenues less variable costs. This amount is available to offset fixed expenses and (hopefully) produce an operating profit for the business.
News and Articles from Bara Business Center
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 News from Greg Cook, EA, CPA, Accredited Tax Advisor at Cook and Company, Tax Advisors since 1957. |
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