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There's certain mistakes we see in client's books more frequently than others. Some of them have more impact on taxes than others.
One of the most common and most costly mistakes we see is the double recording of revenue into clearing accounts.
This mistake is also one that is really hard for business owners and bookkeepers to catch because your bank accounts still reconcile.
The 5 minute test posted can help you determine if the issue exists in your books.
If it does the time to address it is now!
For a business that brings in 100k whose owner is in the 24% tax bracket this a $24,000 error!
And that's not counting issues with FICA/self employment tax.
When you connect a payment processor to your bookkeeping software the majority of them make a clearing account. Your sales are recorded in this account. If you record the deposits from the processor into your bank account as sales you are double recording your sales!
Even if you are not using a payment processor and you are receiving funds directly from clients via cash or check these payments may be getting recorded in an undeposited funds account. If you're recording the bank deposits as sales instead of money being moved from the undeposited funds account you are double recording your sales.
If the amounts in your undeposited funds account or clearing accounts keeps going up something isn't right!
Think you may have this issue and you aren't sure where to go from here?
We're here to help