1. Lesson 9.3 Recordkeeping for Businesses
Goals
Differentiate between alternative methods of accounting.
Explain the importance of keeping accurate and up-to-date bank, payroll, and tax records.
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2. Cash or Accrual Accounting Methods
As a business owner, you will have to choose between two alternative methods of reporting revenue and expenses:
______________ Method
The major difference between the cash and accrual accounting methods is the _________ of when transactions are recorded.
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3. Cash Method ____________________
revenue is not recorded until cash (or a check) is actually received
expenses are not recorded until they are actually paid
Example: If your home remodeling business installed windows in October but you did not receive the payment from the customer until December, you would not record the revenue until December.
The ________________ statement is prepared using the cash method.
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4. Accrual Method ______________________
revenue is recorded when the sale occurs
expenses are recorded when you receive the goods or services
Example: In the home remodeling business, you would record the revenue in October when you completed the work, not in December
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5. Choosing an Accounting Method
Only very __________ businesses use the cash method.
The cash method does not report expenses that have been incurred but not yet paid and revenue that has been earned by not yet received. This distorts a company’s ______________
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6. Choosing an Accounting Method
Most small businesses (with sales of less than $5 million a year) are free to adopt either accounting method. However…
A business must use the accrual method if:
annual sales exceed ___________________
the company stocks inventory that will be sold to the public and has annual sales of over $1 million
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7. What is the main difference between the cash and accrual methods of accounting?
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8. Payroll Records payroll
If you have people working for you, you will have to maintain ______________ records.
payroll
a list of people who receive salary or wage payments from a business
Payroll records show:
Employee earnings
___________________ (taxes and benefits)
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9. Payroll Records
You will need to complete a payroll register for every pay period.
The register will include the following for each employee:
Employee __________________
Number of hours worked
Regular and overtime earnings
Federal, state, and local ________________ deducted
Social Security and Medicare contributions deducted
Deductions for benefits
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10. Tax Records
You will have to make several different kinds of tax payments as a business owner.
__________________ taxes
Payroll taxes
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11. Tax Records
Income tax
Businesses that earn a profit must pay income tax.
________________ or every three months
Prepaid at the beginning of a quarter
Estimate taxes
If you fail to make payments or you underestimate, you may have to pay a __________________
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12. Tax Records Payroll Taxes and Deductions
deduct taxes from employees ______________
submit taxes to the government
unemployment insurance taxes
social security and Medicare taxes
voluntary _________________
Health or dental insurance
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13. Sales Tax
Retail businesses are required to charge sales tax on goods or services
Sales taxes are based on a _______________ of sales.
Varies from state to state
Each month you deposit sales tax into a government owned account.
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14. What kinds of bank, payroll, and tax records do you have to keep?
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15. 9.3 Assessment
Answer the Think About It questions on page 270 (#1-3). Type the questions and bold your answers. When you finish, save, upload, print, and turn in all Chapter 9 assessment questions.
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