What are the Essential Rules of Accounting?

Accounting Rules Debit Credit Flow

Accounting Rules

Are you familiar with the rules of accounting? Have you ever heard someone refer to the rules of accounting and wondered what exactly they were talking about?

Below are the rules of accounting and what each of these rules means:

Debit the Receiver―Credit the Giver

According to quora.com, this principle is used in the case of personal accounts. When a person gives something to the organization, it becomes an inflow and therefore the person must be credited in the books of accounts. The converse of this is also true, which is why the receiver needs to be debited.

Debit What Comes In―Credit What Goes Out

By default, every account has a debit balance. When you debit to the account, you are automatically adding to your existing account balance. This is what needs to be done. Just as when credit goes out it needs to be adjusted accordingly.

Debit All Expenses and Losses―Credit All Incomes and Gains

This rule is applied when dealing with nominal accounts. In most cases, the capital of a company is a liability which means by default it is a credit balance. If you credit all incomes and gains you automatically increase your capital and when you debit expenses and losses you automatically decrease your capital.

Are you still not sure about how you should utilize the rules of accounting? Leave your questions in the comments below and one of our trained CPAs can help you better understand how to implement the rules of accounting into your business.

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Should You Do Your Own Taxes or Hire a CPA?

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Hiring a CPA

One of the biggest questions which plagues many individuals during tax season is the following: should I do my own taxes or hire a CPA? It’s a question that many professionals still don’t know how to adequately answer. In our opinion? You should hire a CPA, unless you’re a CPA yourself and in that case, go for it!

Hiring a CPA can help you in ways which you would never be able to help yourself. CPAs can help you as you navigate through the tax filing process and can also make sure you receive the biggest refund possible.

Here are just a few reasons that should let you know that you need to hire a CPA

  • Do you own a business?
  • Are you unsure how you should file your taxes?
  • Did you recently get married?
  • Did you recently have children?
  • Did you recently experience any other life changing event?

If you answered “yes” to any of these questions, it is an indication that you should hire a CPA to do your taxes. The more unique your situation is, the more likely it is that you will need to hire an accountant to avoid making mistakes. While it may seem like an inconvenience to hire an accountant during tax season, hiring a CPA can actually save you money in the long run.

What other reasons have helped you determine if you need to hire a CPA or do your own taxes? Leave your comments below and let us know about your experience.

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Is Your Accountant Liable If You Get Audited?

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Responsibilities of an Accountant

As much fun as it may be to point the finger and assign blame to other people, it’s not always the answer to all of your problems. In fact, some people wrongly believe that if the accountant you hire mess up your personal and business accounts they automatically assume responsibility. Although the thought that you won’t be held accountable for someone else’s mistakes may be comforting, it’s not actually true in this case.

You are Responsible for Your Taxes

Just because your accountant makes one or two mistakes doesn’t mean you get off free. If your accountant makes an error on your taxes, it’s still your taxes, and you will be held responsible.

Year after year, many business owners attempt to take their accountants to court for being the cause of their audit; however, ignorance of the law does not give you a get out of jail free card. Instead, it actually may make you look worse. As with any other employee you hire, it’s important that you hire qualified individuals who know the laws and also know your business well enough to ensure no mistakes magically arise.

Don’t Target Your Accountant

So if you’re considering firing or even suing your accountant, think again. If anything, they could hold you liable for withholding valuable information that he or she may need in order to do a job for you correctly.

Have you ever tried to hold your accountant responsible for a job they weren’t equipped to do? Be honest and leave your comments below.

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How Hiring an Accountant Can Improve Your Financial Literacy

When many people think about accountants, the first thing they think about is uptight individuals who have been hired to manage the money of your company. Though this may be accurate in some cases, managing money isn’t the only thing an accountant can do. In fact, many people would be surprised to know that they don’t really know much about the accounting profession at all, and that accountants can actually help you improve your general financial literacy.

Financial Literacy Accountant Money Save Spend

Financial Literacy

Accountants know first-hand what the economy looks like from a financial standpoint and can forecast where it will be in the future; and because of their specialized knowledge, they are qualified to teach you whatever you’re willing to learn about financial literacy. Below are just a few lessons in financial literacy an accountant can teach you:

An Accountant Can Teach You How to Save Money

Yes, an accountant can teach you how to save money, but only if you’re honest about your spending habits. An accountant can work with you one on one to see how you could be saving more and where you spend money recklessly.

An Accountant Can Teach You How to Spend Money

Ever heard the quote in order to make money you have to spend money? That quote was probably created by an accountant who wanted to help their clients learn how to spend money. Accountants can help advise you on what purchases can help your business grow and which purchases could send you in the red quickly.

An Accountant Can Help You with Bankruptcy

Bankruptcy is often considered the end all be all of financial issues. An accountant can help you and your business determine if bankruptcy be right for you and your company. They can also help you as you determine what you can and cannot do in order to dig yourself out of a financial rut.

An Accountant Can Help You Make Better Decisions

Whether you’re trying to determine how much money to save, spend or even use on payroll, an accountant can surprisingly help you with all of it. The better financial decisions you make, the better your financial future will be.

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Five Daily Tasks an Accountant Can Do For Your Business

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Daily Tasks of Accountants

Just like any other person who works inside of your office, accountants tend to have a set number of tasks that they must complete every day. These tasks could include things which are very tedious, or things which are more interesting. Whatever their list of tasks may be, accountants generally have a fixed number of things which they have to get done on a daily basis.

Many accountants often report that many of their friends, families and even colleagues ask what they do all day. In an effort to combat any false ideas about what accountants do all day, here is a list of five accounting tasks which an accountant can do for your business on a daily basis:

Accounts Payable

Being able to keep track of the money your company owes can be challenging, and if you’re not versed in accounts payable your accountant can do this for you and practically do it on auto pilot.

Accounts Receivable

Having up to date accounts receivable will greatly help you monitor your cash flow. Keeping a handle on the money that’s coming in (and out) can be really stressful, and so to eliminate that stress your accountant can make sure all the money that you are owed not only comes in on time but that you don’t have to play the role of constantly chasing money your clients owe you.

Payroll

Tired of having to worry about how to pay your employees and when to pay them to ensure they get their money on time? Hire an accountant. Payroll is essential to your company, especially if you have employees, and everyone knows that happy employees also mean a happy company. Get your payroll in order and hire an accountant.

Inventory

Do you know what items you have in your office? Do you know how much money you spend on these items? When they’ve been outdated and when they no longer have value? That’s where an accountant comes in. They step in and make sure that you are actively managing questions and reports about the goods your company has on hand.

Cash Management

Do you have a cash flow management process for your business? Cash management is a critical financial responsibility for your business, and it should never be taken lightly. Hiring an accountant can be life saving to your cash management and flow.

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How Your Business Can Alleviate the Disadvantages Facing CPAs

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Disadvantages Facing CPAs

If you’re interested in hiring a CPA, it’s important that you know what disadvantages they are faced with on a day to day basis. Knowing what disadvantages they are faced with not only helps you begin to view them from a different lens, it also helps you learn how you can better support them as members of your staff. Here are just a few disadvantages of being a CPA:

Increased Stress

While most CPAs thoroughly enjoy their jobs, that does not necessarily mean they don’t deal with a certain level of stress. Many CPAs are often put in positions where they have to work financial miracles, and while they do get plenty of things accomplished, usually their duties carry considerable levels of stress.

Overworked and Underpaid

Many CPAs will be transparent with you and let you know that they often feel as if they are overworked and underpaid. Depending on the size of your business, if you’re unable to increase their wages, make a conscious effort to ensure you provide as much support as you can for them so that they don’t feel overworked and underappreciated.

People Assume They Can Fix All Financial Problems

Again, CPAs are equipped to handle your accounting and finance needs; however, sometimes CPAs are looked at as gods who can work miracles, and that’s not necessarily the case. The best thing you can do before hiring a CPA is make sure that your books are somewhat in order so that your CPA isn’t walking into an accounting nightmare.

What disadvantages does your CPA often complain about? Leave them in the comments below.

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Three Roles a CPA Can Play in Your Business

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Roles Your CPA Can Play

Believe it or not, a CPA can be the best thing that can ever happen to your business. While many people view CPAs as the ones who play the financial role in your business, there are actually several different roles a good CPA can play. The financial aspect of a CPA’s job is by far the most important; however, your CPA has the potential to literally be the glue that keeps your entire team together. Here are three other important hats your CPA can wear in your business.

The Negotiator

Are you faced with a big financial decision that you need to make, but the numbers just aren’t quite the way you want them to be? Your accountant can step in and serve as your financial negotiator. This is usually effective, because your CPA normally has no emotional attachment to your business and can help you get the results you want simply because your CPA will refuse to back down from what’s best for the business.

The Rationalist

On so many occasions, especially as it relates to purchases, it can be difficult for business owners to think rationally. Most business owners unfortunately think with their emotions and not with their brains. Because of this fact, your CPA can work as a rationalist to make sure you are not making decisions that could be detrimental to your business.

The Middle Person

Does your business always struggle with having to make decisions? Can everyone not seem to get on the same page for one decision? Because of most CPA’s analytical way of thinking, you may be able to utilize your CPA as the middle man or woman who can help your company make decisions more efficiently.

What other roles do you think your CPA can play within your company leave your comments below.

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  • Huddleston Tax CPAs / Huddleston Tax CPAs – Burien
    Certified Public Accountants Focused on Small Business
    14900 Interurban Avenue S, Suite 271 / Tukwila, WA 98168
    206-229-7169

    Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching,
    QuickBooks consulting, bookkeeping, payroll, offer in compromise debt relief, and business valuation services for small business.

    We serve: Tukwila, SeaTac, Renton. We have a few meeting locations. Call to meet John C. Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.