Covering the Bases: Labor and Insurance
Let's dive back into this uh we were looking at the chart of accounts and, um some of the things that we addressed have to do with paying people to do other stuff um so we're gonna look at some examples of those kinds of people and where you put them, um these next couple of sides are sort of my like frequently asked questions about chart of accounts these are the areas where people most often um have trouble figuring out where to put things so um depending on who the person is and what they're uh helping you with they go in one of these categories or another um so we talked a little bit about this already employees who make or package your products for you they would go in your cost of goods sold um and then employees who perform other functions in your company they would go in that employee wages account if they're doing administrative work remember we talked about the cost of goods sold account uh category being sort of trump category if you can put it in there and it makes sense to...
put it in there I would put it in there before categorizing your expense somewhere else like wages um if you have someone who's not an employee but they helped you, uh put together the products you're selling that would be under production labor again cost of goods sold um if you want, you can separate in your cost of goods sold um production labor, you know, employees, production, labor contractors or you call it production labor, wages versus production, labor however you wanna label it is kind of up to you, it's, whatever makes the most sense um, your craft fair booth buddy. Someone who comes and helps you sell things but doesn't help you make anything that's contract labor. So is the contractor who designs your new website or, um, perform some other service for you that's not one of those legal and professional services, right? Like bookkeeping or tax preparation? Um, that goes in the legal and professional services to the c p a who did your taxes? Um and that sort of breaks down where all of those labor categories go. So next we're going to look at, uh, some different kinds of insurance because that was another place where people had questions. Um so we talked about, uh, your own health insurance that doesn't go into your business expenses at all because it is not a cost of your business. It's a personal expense, your health insurance. If you are paying other people's health insurance like your employees, if your business is paying their, uh, benefits, then you would put that under the employee benefits category um if you were an employee of your company if you had one of those business structures that was more corporate um then you could put that in there as well. Um but for most crafters who our sole proprietor or a partnership or maybe even an llc um your health insurance would be a personal expense and not a business expense. You wouldn't include it in your ledger at all uh liability insurance we talked about a little bit that's for your business. Um so that would go in the insurance category. Um any insurance you have on your home or your, um apartment whether you own or whether you rent if it's part of your if you have a home office, then you can put that percentage of that insurance into your home office account. Um if you we talked about this a little bit too if you have a home based business and you have that special rider that just covers your home based business, the whole thing goes in the insurance category, right doesn't go in the home office even though it's insurance on your home office I know that that's kind of confusing but because not a portion of that it's for your business, the whole thing that whole rider that whole cost is a business expense you would put that in the insurance category and then finally auto insurance that goes under their car and truck, calculated at the percentage that you actually use that vehicle for business. Um, it does not go in the insurance category. But I know that it can be really tricky. Tohave all of these things, like contract labour and insurance. That seemed like one thing. But actually, you would track them in all of these different places.
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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.
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