Bookkeeping for Crafters

Lesson 15 of 33

Bookkeeping for Expenses

 

Bookkeeping for Crafters

Lesson 15 of 33

Bookkeeping for Expenses

 

Lesson Info

Bookkeeping for Expenses

We have done the fun parts where all the money is coming in and you get to see uh what everything looks like from uh income perspective um and we could talk a little more about particular income transactions if you have questions that come up um either here in the studio or out there in the great wide world um if you have a sort of tricky income situation and you don't know exactly how to put it in the ledger feel free to send a question on down and we'll use it as an example um but now I want to move on to entering expenses uh this is a little bit meatier because uh you know we only have a few income accounts we basically have product sales uh shipping and handling consulting other income and then those tricky allowances which is a negative income account uh which is a little weird um but for expenses if you'll recall from that chart of account section we have a ton of these we've got all of the cost of good soul we've got all the marketing and selling expenses and then we've got all ...

those other expenses um if you need a quick reminder of what's part of those uh accounts um we have that chart of accounts sheet a cz part of the bonus materials and it's a pretty similar process to income in a lot of ways with a couple of little tweaks so uh just like we, uh started by sending out our invoices and getting paid because we want to make sure that we're making the money our first step is to look at any bills and make sure they're accurate make sure that you're not getting charged for something that you shouldn't have been make sure that something has not been calculated incorrectly uh make sure that the due date on there is what you've agreed tio um because you don't just want to send out payments for bills without making sure that they're there right um and it doesn't happen often, but it has happened on occasion that I have gotten incorrect bills they charge me for something that they actually said they were out of stock um in four uh or I've gotten, uh bills for, uh more than we agreed to as faras like an hourly rate or um something that didn't include a discount for paying earlier buying in bulk or whatever um so it's always good to open those up and check for accuracy and uh in another segment we're going teo look at reconciliation where we match everything against your various bank accounts credit card accounts again to check for mistakes because while there not common, they do happen and that can really add up so it's always important to make sure that everything aligns uh and is the way that you expected it um next we're going to record the, uh date that uh you got that bill or that receipt in your ledger right? Data's always first uh and then you're going to enter the due date in your calendar um you will also enter it into your ledger and again while you're in your calendar you're going to check for anything that's coming up that you need to pay and maybe haven't paid yet because you don't want to get any fees for paying things late that's a dumb expense to pay that's totally preventable nobody wants to pay late fees on anything right and when it comes to stuff like credit cards like some of those fees are amazing if you miss a payment it's like a thirty five dollars fee and then they charge you interest on everything that's in there that can really really add up so you definitely don't want to be incurring big expenses um for paying something late when you have the money and there's really no reason for you to do that um you will pay those bills that have come due and you will mark that down as well uh in the er uh the balance sheet we're gonna look when we cover uh, deposits and payments uh in a later segment um we're going to take a look at that and uh when you do that you want to mark the date and the payment type in the ledger uh the date that you paid it how did you pay it uh again so that we can match everything up when we reconcile all of our different accounts um if you pay that by cheque and you have a checkbook it's nice to record that in your checkbook again these days spanks are taking pictures of everything so presumably if you don't remember what that check for two hundred seventy five dollars was for you could look it up online and it will show you a picture of that um but I don't always like to rely on that because sometimes they say well, we only save checks going back sixty days and you know, if he needed to figure out something further back than that um you don't have any information to rely on other than what you've recorded yourself uh and last but not least we're gonna update the inventory and equity again um we didn't really do the inventory for the income section, but we're going to look at that uh in this section because we have more time to do so um so let's go back to the ledger and then this time we're going to bring up instead of the income detail, we're gonna look at the expense detail and we're going to do a couple sample transactions they're so like I mentioned previously um in the office that summer in the two thousand four section I've got some sample transactions here already for you to take a look at lets make this bigger uh some of these air not large enough and you cannot see what's happening pro tip if you have a spreadsheet and one of the boxes has a ba jillion number sines and it's just because the columns not wide enough to show you what's actually in it it doesn't mean that you've got a formula wrong or something um let's open these up a bit more so we can see so I have filled out all of january already with fake transactions so that you can see what happens to the totals um I've got totals here for, uh the amount that you've paid in expenses or rather the amount that you've been billed for in expenses and then underneath it the amount that you've actually paid um thes payment boxes use a big complicated some if formula um that requires you if you're using the fancy leisure teo uh keep your accounts the same when you type them in. So uh, if you are saying, for example, um car slash truck over here and, um you wantto have it pull all of the things that air for a car slash truck, you cannot call it car slash truck here and then call it vehicles elsewhere um, it should match that chart of accounts as best as possible. Um and that will pull into these summary sheets. You can see how everything is labeled here. Uh, this is also very small. Okay, so materials and supplies, um, it's better to write that out as materials and supplies rather than material slash supplies. If you want to use that formula that's in the fancy spreadsheet, if you don't care, label whatever you look, um, and if you're using the simple version of the spreadsheet where you don't have all these complicated formulas fine. Um, you don't need to worry about that either. Uh, this is only if you want to use the fancy stuff. All right, so we got a couple of sample transactions in here already. Um, at the top, I've got all the things that air do levelling out one here, but typically you'd have all the things that are due the first of the month, which is usually a lot of things. Um, and here I've got let's say, uh, studio rent that's that twenty two percent of my apartment. So I am putting that under the home office account uh, it was let's say I got the bill, I don't really get billed for my rent, but if I got build, I would say I got build on the first of the month um it's due on the first of the month I paid it on the thirtieth of the previous month because I don't like late payments I paid it with a check um and so twenty two percent of my total rent is this nice number here to sixty to ninety uh and then if I wanted to keep track of it in my notes I could put what check number it wass so that if my landlord ever camp came saying I never received your rent check for january um I could say yes you did it was check number one o four and then I could look it up with my bank and see if it had been deposited or what happened with that um and there you go then I've got web hosting under here for ninety six dollars I paid it via e f t stands for electronic funds transfer um so if you pay that um like through your bank account like let's say it it builds you monthly and it just pulls that money out of your bank account. Um insurance will very often do that. Um if you get paid via direct deposit you might have f t and your income sheet as the payment method anything that's elektronik lee transferring fun's um isn't ft um I paid for it the day that I bought it there was no bill I put it in advertising and promotion um I can't scroll this over any farther here I'm gonna gonna move these off the screen so you can't see them and I'm gonna ask you what accounts these are for you to do a little bit of a pop quiz. Okay uh printer ink that I bought on the tenth office supplies yeah. What about this business license that came due? My annual business license renewal? What is that go under anybody now I mentioned it earlier in the chart of accounts it's not actually a license it's technically attacks the tax on doing business being allowed to be a business in the city of san francisco so I stuck that under taxes. What about guess where would I put that mileage and auto car truck or something? Yeah. Cartwright and vehicle auto whatever you're calling this account um is where you would put that. And now this is assuming that I use my car for only business. If I were not using my car exclusively for business, I would need to multiply this by whatever percentage um I actually use my car for business. You might not know that percentage until the end of the year um so you can either guest inmate and you can kind of put the total in the notes so that you can go back later and correct it um or you can leave all of this stuff in as a business expense and then you just don't really track your car and truck expense um until the end of the year when you figured out what percentage you've had so um if you do it that second way where you put in the totals for everything even though some of this is personal expenses um unless you drive your car a lot a lot a lot it's probably not going to skew your total business expenses too much um but if you get a sense that it does then I would go ahead and estimate well at the very least I know that I use my car about half the time for business or on ly ten percent of the time for business on then at the end of the year when you figure out that exact percentage you can go back in and make that correction um and you either need to hang on to those receipts then or you need to put in the notes like total price forty three twenty five but I'm estimating that I've only used a fifth of that twenty percent of that uh towards my business um so let's actually go ahead and and and do that just for the sake of visual learners um if I only use my car for business twenty percent of the time uh I'll multiply this by point two and then in the notes I will put full price forty three twenty five and you could kind of do that with your home office too but it's a lot easier to go in and measure your home office one time and then have the percentage forever than it is to figure out well how many miles do I think I'm going to drive this year um for business versus personal use okay uh those ham buttons that I like to talk about uh so much what would this go under account wise and he guesses excels what that product sales no there's no sales here because this is not income these this is expensive so I bought these from some one else remember my hand was cramping really bad and I couldn't do this sewing or anything else I wanted to for my business so I found this company in chicago that would make the buttons for me for twenty five cents apiece and I thought that's totally worth it I'm going to buy five thousand of these from you at twenty five cents apiece for twelve hundred fifty dollars um you want to pay with my credit card uh what account when I put this in uh yeah cost of goods sold for sure and but what specifically within that materials even if you're buying it ready mean no no anybody have it in front of them anybody I guess inventory yes inventory awesome all right, we've got our first inventory purchase let's had this to inventory so the inventory she does a little farther down we bought five thousand ham buttons at twenty five cents apiece so let's put this in our inventory got an inventory summary in an inventory detail so the date I think I said was the sixteenth I've got a ham button that I purchased five thousand of at a cost of twenty five cents per um I didn't sell any I purchased them so I'm just going to put a little x here in this column they were purchased um the other options for this if you have a change in inventory is you sold it so that's why you have less inventory you purchase some so now you have more inventory um you withdrew it so this I think she has withdrawn yeah uh you withdrew it because you wanted to donate it to charity you wanted to give it a business gift whatever reason you took it out for personal use um or it got lost or damaged um and you otherwise just don't have it. Um so this is your detail you put in the date you put in the item the quantity the cost uh and then what happened to it whether you increased or decreased the number and why and then at the end of the year um you will sort these things by column b so that you have all the ham buttons together you have all the ham plush together you have all of the stake pillows together uh and then at the end of the year you will be able to say okay thie quantity I had in the beginning of the ham buttons uh well I don't know how many I'll have in stock at the end of twenty fifteen will say I have fifteen sixty at the end of their um I've got I had five thousand to start with I sold er how many did I sell? I sold three thousand of them I withdrew forty of them and I was like get me for and then I lost four hundred of them people just stolen off my craft fair table they thought they were free. Um so then my ending quantity in twenty fifteen if I did my math right um we'll still be fifteen sixty let's see if this is correct let's make a little equation and find out uh this is equal to my beginning quantity minus what I sold minus what I withdrew and minus what I lost. Fifteen sixty hallelujah all right, my little calculator still works, so if that matches at the end of the year great you've accounted for every piece of that inventory it doesn't match, you need to figure out where it went, um because this is an inventory summary. Uh, I mean it's labeled inventory summary twenty fifteen, but you don't have to do this. Just a theo end of the year. You will have to do it at the end of the year to put your taxes together, right? Because they need to know the starting value of your inventory and then the ending value of your inventory. Um, but you can do this, you know, every month when you do the rest of your bookkeeping at the end of that process, like I mentioned, you should check your inventory and make sure that you've updated anything in there. Uh, that you need thio, um, and if you can't find what you're looking for in the inventory detail, if you haven't, uh, put it in here, then you'll need to check it out in your, um, income or expense detail. What did you buy or sell from an inventory perspective that maybe you didn't update in here? And if it's just missing, just plain old missing, well, then it goes in the lost damage category, right? You lost it, you don't know where the heck it went. Um, so you would put that in lost or damaged, uh, in both the detail and then later on, it'll appear in the summary

Class Description

It is common to be intimidated by math and money, but managing your business’s finances doesn’t have to feel overwhelming. Bookkeeping for Crafters with Lauren Venell will give you the confidence and skills you need to start and maintain your own small business ledger.

Lauren is an artist and educator committed to making financial solvency accessible to independent entrepreneurs. In Bookkeeping for Crafters you’ll learn the basics of managing your money and how doing it yourself can reveal important opportunities for your business.

You’ll learn about managing different types of income and expense accounts and how to painlessly prepare for tax time. Lauren will make predicting fluctuations in your cash flow straightforward and easy while helping you develop a system that is right for you – even if you prefer pen and paper over spreadsheets.

If you are ready to change your relationship to money and manage a ledger that is customized to the way you do business – this is the class for you.

Be sure to check out Lauren's other course Bookkeeping for Etsy Sellers.

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