What Accounting System will You Use For Your Home Business?

 

Accounting is a necessity in any business, large or small. It is simply process of tracking money coming in and out of your business. Of course there is a lot more to it, depending on the type of business you do. I am currently trying to perfect my accounting for my resale business. It is a process, and I have actually taken accounting classes, with more to come soon. 

In the past I have always been in some form of business management. Each and every business I worked for had different accounting methods, but it was always for the same result. Where is money coming from, and where is money going to? With all of the research, learning, and tracking that you have already completed for your business, now the IRS needs you to choose an accounting method for reporting your income and expenses.

When filing the taxes for your business there are two basic accounting methods, for any other accounting methods, please read publication 538. I am posting the information available in IRS publication 583. Order your publications at the IRS website. If you ever search for the IRS or any government entity, be sure that it is a .GOV site. There are a lot of sites that look like it is authentic, but are scams.

 

Exert from Publication 583;

Choosing an Accounting Method:

 An accounting method is a set of rules used to determine when and how income and expenses are reported. You choose an accounting method for your business when you file your first income tax return. There are two basic accounting methods.

    1. Cash method: Under the cash method you report income in the tax year you receive it. You usually deduct or capitalize expenses in the tax year you pay them

    2. Accrual Method: Under the accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. 

If an inventory is necessary to account for your income, you must generally use an accrual method of accounting for purchases and sales. Inventories include goods held for sale in the normal course of business. They also include raw materials and supplies that will physically become part of merchandise intended for sale. 

You must use the same accounting method to figure your taxable income and keep your books. Also, you must use an accounting method that clearly shows your income. In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows your income. An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. 

More than one business: 

When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. You must keep a complete separate set of books and records for each business.

Changing your method of accounting:

Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. 

End Exert

Your accounting method is not only important to the IRS, but for your business. Since really starting Weeks Finds, my resale business, I have learned that accounting consists of a lot of different areas. There are purchases from many different places, and costs for almost everything is different even if you buy in bulk. You have to keep track of the cost for each item, set prices for items based on cost, then watch how long an item has been in your possession to see if you need to lower the price. There are also times when I purchase something, then realize it is damaged, I have to account for the loss of that item. I currently have quite a few spread sheets going, but I am trying to get the process streamlined. Once the business gets more profit, I would love to invest in an inventory tracking system or a POS. Something that will allow me to spend more time on the sales end of the business, rather then the accounting end.

This is a topic I will probably be delving into more. I have the publication 538, which is accounting periods, and methods. It has a lot more information on accounting methods available and rules to those methods. It is something I want to learn more about for my home business, and would love to share the knowledge I gain with anyone wanting to learn.

Many Changes Since I started this Blog in 2009

 

I received a notice from Google about this blog and how the content does not meet their standards. It has for a few years, but something caught their attention. This made me curious, so I went back through all of my blog posts on My at Home Income Blog. After reading several of the posts I thought to myself, "Hey Google may be correct!". I was entertained by some of the posts I made simply to attempt to get traffic to sites that I used to write for, and others that had so many links that went to absolutely nowhere because of sites that have shut down. Most of the things I did as a home income in the beginning are not even available now. I went through and deleted a few posts and updated some links, there are probably still a few that are not great on here. Now I would like to share how so many things have changed since 2009 with a home income, writing online, and simple ways of earning a few dollars.

 

I was very big into writing for a variety of sites when I began this blog. There were quite a few that were very lucrative, but people were taking advantage of it an publishing mediocre work. For those of us who worked hard on their articles, it was devastating to lose so much income. Sites such as Ehow, Associate Content, Firehow, and many others have either changed the way they gather informative articles, or they have shut down completely. I have not been in the writing community for a while, but I am hoping to brush up on sites that allow for individuals to submit work. I do actually have articles on Hubpages, and have made a little money occasionally. I went from making about $1500 a month to not making hardly anything from my writing online. I made a big chunk selling them, but that was quite a few years ago.

Paid Per Click sites that I used are almost all out of business. The ones that are still in business, changed the way they paid or began offering different forms of payment. Unfortunately, Paid Per Click sites were never very lucrative, but it did help me pay a few bills or purchase some food through the years. It probably would not do that now. I am sure most would cost more in utilities to use then they pay.

 

So what sites are still paying after all of these years? There is only one site that I found in my late articles that still pays me, and I use it quite a bit. That site is Inboxdollars. I have used earnings from Inbox every Christmas for at least the last five years. It may only be $50 or so, but it is money earned in simple ways without much effort. It is not an income really, but a part of my Christmas savings plan. I use it in addition to a few receipt sites that I gain earnings on through the year. It has given me a total of about $500 the last two years to purchase Christmas gifts for my kids.

So, what now? Well in my previous post, Weeks Finds will be Official, you can read about finally opening up an Ebay store. The profits on the store has allowed me to profit a few hundred a month. Not a life changing amount, but enough to get by for now. Unfortunately i cannot work like I used to, actually not much at all. I enjoy doing the resell because it is something I can do on good days, and I can take breaks when needed. I am hoping to get my Notary License in the next week or so, which I can make a few dollars from home with that. Finally, I am returning to school to get my bachelors in Finance. I would also start to write more again. I may look into sites that pay for content, or I may just use this blog and my other blog Saving Money and Home Finances to publish writings that I enjoy. 

We will see where this all leads. Hopefully I can share more of my successes in the near future. With each avenue I take I hope and Pray for success and do the same for each of you.