What is a Sole Trader – Leigh Barker MWC Group

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Where an individual operates a business as the sole person they are
generally referred to as a sole trader.

Becoming a sole trader is the simple and relatively inexpensive. A sole
trader has full control of all assets, makes all business decisions, is a
low cost structure and has fewer reporting requirements.

A sole trader has many characteristics, some of which are listed below

  • Unless a business name is required, set up costs are negligible
  • Administration is generally limited to bookkeeping and accounting
  • A sole trader retains all the profits of their business
  • A sole traders financial information is kept private
  • A sole trader is legally responsible for all aspects of the business
  • A sole trader is personally liable with unlimited liability

A sole trader business model is most popular with tradesman and specialist
service providers prior to commencing business as a sole trader

  • determine if any form of authorisation or registrations are required
    from regulators or local authorities
  • consider managing the business separately by operating from a
    separate bank account
  • ascertain if business insurances are required or desirable
  • find suitable premises to operate from within

As a sole trader business grows it is relatively easy to change this form of
business structure or to close a business operating as a sole trader.

Prior to deciding on a business structure seek professional advice from an
accountant, solicitor or business advisor to ensure that the structure
selected meets your personal circumstances and business objectives.

Please note: Prepared by Leigh Barker MWC Group, Accountant, Portfolio
Finance, Gordon, West Pennant Hills and Tangible Assets,. Note that all
content of this blog is general in nature and anyone intending to apply the
information to practical circumstances should seek professional advice to
independently verify their interpretation and the information’s
applicability to their particular circumstance.

What is a Bookkeeper

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A bookkeeper is the person who records day to day financial transactions such as sales, purchases, recepts, and payments for individuals or organisations. The bookkeeper is responsible for making sure that all transactions are properly recorded in the general ledger, the sales ledger, the purchases ledger, the inventory ledger and the asset register.

A bookkeeper requires accounting and mathematical skills to carry out the task of balancing financial records. The bookkeeping process records the financial effects of transactions. As a document is procedures each time a transaction occurs, the bookkeeper records the details of all source documents into the various ledgers and brings the books to the trial balance stage.

At the end of a designated period each journal is totalled to provide a summary for that designated period. The bookkeeper will check that all posting have been done correctly and balanced. Thus the bookkeeper will maintain a complete set of books, retain records of accounts and verify the procedures used to record financial transactions.

The duties of a bookkeeper include establishing and maintaining accounting records through a bookkeeping system, posting general journal entries, reconciling accounts, the preparation of a trial balance, running the payroll, paying supplier invoices, completion of workers compensation documentation, completion of regulatory documentation.

A capable bookkeeper can handle a constant stream of data and deal with unexpected issues or events. As a bookkeeper is required to interact with others in the business they must also have people skills.

A bookkeeper is an integral part of every business.

Please note: Prepared by Leigh Barker Accountant at MWC Group, Tangible Assets, Portfolio Finance, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

What are Retained Earnings

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Retained earnings are the profits generated to date less any dividends or distributions paid. Retained earnings are reported in the balance sheet and the owner’s equity statement and are classified as an asset as it has a positive value. Retained earnings are not paid out as distributions or dividends but are retained by the business entity to be reinvested in core business activities or to pay down debt.

From an accounting perspective the retained earnings at the end of an accounting period become the opening retained earnings for the next reporting period which is either increased if there is a net profit or decreased if there is a net loss.

Retained earnings are a reflection as to how a business has managed its profits and does not represent surplus cash available to the business. Retained earnings are important as it demonstrates what a business has done with profits.

While a profitable business will expect a return by way of distributions or dividends there is also an expectation that a business will grow thus becoming more profitable. This means that a business will use retained earnings to grow.

Retained earnings can fluctuate from one reporting period to another and while the general consensus is that revenue is the key driver, the other factors that have an affect are increases of decreases in items such as the cost of goods sold, administration costs, taxes, distributions or dividends.

Please note: Prepared by Leigh Barker Accountant at MWC Group, Tangible Assets, Portfolio Finance, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

What is Accounts Payable – Leigh Barker West Pennant Hills

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Accounts payable is an accounting term used to describe the money owed by a business to its suppliers. Basically accounts payable is a short term debt and represents an obligation to creditors of either an entity. Accounts payable is classified as a current liability in the balance sheet as payment generally takes place within a short period of time. Accounts payable are usually due within a 30 to 60 day period and usually no interest is charged if the balance is paid on time.

Accounts payable can include such items as expenses, payroll costs, taxes, short term loans, physical goods, advertising, travel entertainment, office supplies, utilities etc.

Accounts payable occurs when a supplier of goods or services delivers ships or provides a service then issues an invoice and collects payment later.

To record and report accounts payable a credit entry is posted to accounts payable when an invoice is identified as payable and debits accounts payable when the payment is made for the invoice received.

While some interchange the terms “accounts payable” and “trade payables” the terms refer to similar but slightly different transactions. Trade payables comprise money owed for business materials and supplies while accounts payable is broadened to include all other short-term debts.

Thus is a newsagent owes money to the supplier of cards or magazines then this inventory forms part of its trade payables, whereas money owed for utilities or payroll related items it would form part of accounts payable. It is not uncommon to have both items reported in the accounts payable category.

Please note: Prepared by Leigh Barker West Pennant Hills – Accountant at MWC Group, Tangible Assets, Portfolio Finance, and Gordon. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

What is a Debtor

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As very few businesses receive cash for goods and services they provide or pay cash for expenses they incur, common business practice is to sell goods and services on credit to another party who pays the business some time later.

Thus debtors are those parties who owe money to another party.

Debtors are customers such as a company or an individual or an agency etc who have purchased either goods or services and therefore owe money to their supplier which is paid at a later date. The supplier is commonly referred to as the creditor.

Debtors have a legal obligation to pay an amount to the supplier under the terms of the agreement between both parties and should the debtor fail to fulfil their obligation the supplier may seek recourse in an appropriate jurisdiction. Thus before the supplier permits goods and services to be released to the debtor the supplier reviews and makes a judgement call as to the credibility and financial status of the debtor to pay under the agreed terms.

While it is possible to maintain a manual system to track debtor movements there now exists a series of commercially available software packages that will generate invoices, maintain a track of any amounts owing, update individual debtors upon receipt of payment and automatically determine the total value of all outstanding debtors. Thus a robust filing system is required to maintain a track of those who owe money to enable prompt follow up of any overdue amounts owed to a business.

Please note: Issued by Leigh Barker Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

What is SuperStream

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SuperStream is a government reform which aims to improve the process for reporting employer contributions to superannuation fund administrators. The primary purpose of SuperStream is to ensure that employer superannuation contributions are paid to a members account in a consistent, timely and efficient manner. Under the SuperStream Standard employers make superannuation contributions which comprise an electronic transfer of both contribution data and payment. All superannuation funds then receive contribution data and payments electronically.

The accounting practice uses BGL Simple Fund as the administrative software for self managed superannuation funds. BGL is working with Australia Post to ensure that the process of registering and reporting contribution data for SuperStream is efficiently handled.

Clients who we have registered are required to provide their employer with the following information

  • The name of the self managed superannuation fund
  • The Australian Business Number of the self managed superannuation fund
  • An electronic service address (ESA) which is AUSPOSTSMSF
  • Bank account BSB and Account Number

The Australia Post Gateway Service will act as an end point gateway service for all electronic messages from employers and other superannuation funds. Australia Post has developed a service to meet the ATO’s electronic data message requirement for gateways. The service offered by Australia Post delivers superannuation transaction messages via a secured electronic distribution network to a nominated email address.

Please note: All comments in this blog are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance. Issued by Leigh Barker West Pennant Hills.