Utilizing Financial Statements for Your Recently Incorporated S Corporation or LLC

Utilizing Financial Statements for Your Recently Incorporated S Corporation or LLC

When I am working with a client to help them understand the many business and tax nuances associated with preparing their own internal financial statements, it is the best time to help a client understand both the financial and tax impact of business decisions reached. Below is a sample of a letter that I might accordingly send a client.

In Critiquing the Internal Data You Forwarded I have the below questions/suggestions:

-I did not see a Balance Sheet. When you forward this please be sure to forward along a reconciliation of the monies/notes payable to owners. Please be sure that your 12-31-08 Balance Sheet equals the Balance Sheet on the Business Income Tax Return.

-I recommend all of my clients use business mileage rather than actual automobile corrections as most always results in less record keeping and typically allows a larger tax deduction.

-Please break out your Insurance into the below categories as tax law directly affects as to how these monies are treated for tax purposes:

Insurance - General

Insurance - Medical/Dental

Insurance - Life Insurance

Insurance - Disability

-You had several smaller accounts that I would suggest you combine into and record as Office Supplies (Advertising and Promotion and Bank Service Charges, and Ask My Accountant). General goal is to have enough accounts as required by tax law to correctly prepare return and to manage the substantive financial affairs of the business.

-Put into the proper categories the Uncategorized Expenses and Uncategorized Income.

-I would re-title Professional Fees to Legal & Professional fees and then put into this account CPA and Attorney Fees. Please review and advise as to what monies are presently coded to this account.

-I understood you had not added anyone to salary yet. If to date you have paid independent contractors then I suggest you movie these monies to an account in the Cost of Goods Sold section called Independent Contractors.

To help you with this process review our article at http://www.hiscpa.com/financial-statements.html  

To learn more about addressing IRS Tax Issues and Back Tax Returns visit http://www.hiscpa.com/working-with-the-irs.html  

John Dillard is an Christian Speaker/Author and Certified Public Accountant in Duluth, GA. To See how he takes Christ along with him to work visit http://www.hiscpa.com/  and for his latest book Overcoming Life's 9/11's: Job's Journey and a Voice of One: Nehemiah's Prayer visit http://www.john-dillard.com/  or call John Dillard CPA today at 770.814.9304 (All Rights Reserved) Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!