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Four Confusing Bookkeeping Situations and Why You Should Leave it to the Pros


Bookkeeping seems simple most of the time – most of it is quite repetitive. But it is always a small fraction of transactions that will take up most of your time. These situations do not happen often but each one can take up a lot of time. And before you know it, you will have sunk hours into an obscure bookkeeping issue when you least expect it. Here are a few situations that can make bookkeeping tough.


Partial Refunds

For various reasons, sometimes you are in a situation where you are issuing a refund to a customer. After the cash is paid back, you would still have to take care of the bookkeeping and account for the refund. In this case, there are several options. If the recent is shortly after the issuance of the original invoice, you could just issue a new invoice to replace the original one, assuming the customer agrees with that. Alternatively, you could issue a credit invoice if your accounting system allows that. Finally, the last option would be to make a manual entry to debit revenue and credit cash.


Credit Card Charge Backs

A credit card charge back is when a payment made with credit card is cancelled and the funds taken back away from you because the holder of the credit card is disputing the charge. There can be many reasons this can happen. Typically, the credit card processing company will also charge you a dispute fee for the chargeback. In that situation, your journal entry would have to take down the revenue and cash and also account for the chargeback fee.


Invoice Prepayments

Sometimes clients pay you without an invoice and ask that you date an invoice a few months later. There are a few ways to deal with this. The easiest, but incorrect, way would be to ignore the prepayment and book the payment when you create the invoice at a later date. But this would not work if the period lapses a year end or if you need to do the bookkeeping right. In that case, you will need to book the prepayment as a credit to customer deposit on the liability side of the balance sheet and debit cash of the same amount. On the invoice date, you move that balance to deduct the accounts receivable generated by the invoice.


Cash Balance not Reconciling

This one is a recurring nightmare for every business owner. The cash balance and month end bank balance never reconcile without a lot of time and work. Sometime always goes wrong: transactions not being recorded, duplicate entries from automatic data import, transactions booked wrong (date, figures, etc.), misclassifications, so on. There is no real magic bullet in this situation. The most foolproof way is go through each bank transaction one by one and match that to the corresponding transaction on your books. Start from the first month, reconcile each month individually and move onto the next month only if the current month reconciles.


Why You Should Leave Bookkepping to the Pro’s

It is only a matter of time for anyone doing bookkeeping to run into these situations. Do you really want to spend your precious time on the many possible bookkeeping issues? Your time is money. Business owners have limited time and energy to grow and build their business. Reconciling your cash balance at year end may feel like a person win, but the time spent comes in expense of more productive, money making activities. Bookkeeping can be a real time sink and an easy activity to delegate. At Momentus Bookkeping, we have many years of experience providing bookkeeping services to businesses in Vancouver, Richmond, Burnaby and the surrounding areas. Contact us today to see how we can help you on your bookkeeping needs and never have to worry about debits and credits again!

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