Kent, Parker & Associates, Inc. – Certified Public Accountants

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Frequently Asked Questions

Below are some of the FAQ’s that we receive and our answers to them.  If you don’t find what you are looking for, click the “Ask a Question” button below and fill out the form and we will get back to you in a timely fashion.

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Should I hire an accountant?

Hiring an accountant is a great decision for a number of reasons. First and foremost, accountants have the expertise and experience to help you save money on your taxes. They can also help you manage your finances and keep your business records in order. Furthermore, hiring an accountant can help you avoid common mistakes that can lead to costly fines and penalties. If you’re looking for someone to help you with your financial affairs, contact us today for a free consultation.

What records should I keep?

There are a few different types of records that you should keep for your accountant, depending on whether you are running a business or just have personal finances. For a business, you will need to keep track of all income and expenses, as well as any invoices or receipts. For personal finances, you should keep track of your monthly budget, any bills or statements you receive, and your credit score. It’s also helpful to have a record of your assets and liabilities so you can stay aware of your net worth.

How do I find my Break-Even point?

The break-even point (BEP) is the point at which your business neither makes a profit nor suffers a loss. It’s reached when your total revenue equals your total costs. To find your BEP, you need to know what your fixed and variable costs are. Fixed costs remain the same regardless of how much product or service you sell, while variable costs change with sales volume. Once you know these figures, you can calculate your BEP by dividing your fixed costs by the difference between unit selling price and variable cost per unit.

What are my financing options as a business owner?

Small business owners have a few different financing options to help them grow their businesses. One option is to take out a loan from a bank or another lending institution. Another option is to receive money from investors, either angels or venture capitalists. Small businesses can also seek out government grants or funding, or partner with larger businesses in exchange for a percentage of ownership in the company. Finally, small business owners can use their own personal savings to finance their businesses. Whichever option business owners choose, it’s important to do your research and compare interest rates and other terms before making a decision.

How can I prepare for Tax Season?

There are a few things you can do to prepare for tax season. First, gather all of your tax documents together. This includes W-2s, 1099s, receipts, and any other documents related to your income or expenses. You may also want to start tracking your expenses throughout the year so that you have a record of them. If you plan on itemizing your deductions, be sure to keep track of all of your medical and dental expenses, charitable donations, and other deductions. Finally, file your taxes as early as possible to avoid last-minute stress.

When should I pay estimated taxes?

You should pay estimated taxes if you expect to owe $1,000 or more in federal taxes for the year. You can either estimate your own tax bill and pay quarterly installments, or have your tax preparer do it for you. If you choose to estimate your own taxes, be sure to stay on top of any changes in your income or expenses that could affect your liability.

How should I structure my small business?

There are four common business structures: a sole proprietorship, partnership, LLC, and S- or C-corporation. Sole proprietorships and partnerships are the simplest forms of businesses to set up and operate. An LLC offers more limited liability protection than a sole proprietorship or partnership but is still less complex to establish and run than a corporation. S-corporations offer their owners limited liability protection as do LLCs, but they also have the benefit of being taxed like partnerships. C-corporations offer the most limited liability protection of all business structures but are also the most complex and expensive to establish and maintain.

What accounting terms should I be familiar with?

There are a few key accounting terms that individuals should be familiar with in order to understand financial statements and reports. Some of the most important terms are listed below:

Asset: An asset is anything of value that a company owns. It can be tangible, such as cash or equipment, or intangible, such as trademarks or copyrights.

Liabilities: A liability is any obligation a company has to others. This can include money owed to creditors, amounts payable in the future under contracts and taxes owed.

Owner’s Equity: Owner’s equity represents the portion of a company’s assets that belongs to the owners. It is calculated by subtracting liabilities from assets.

Revenue: Revenue is the income generated by a company through its normal business activities. This includes sales of products and services, interest income and dividends received from investments.

Expenses: Expenses are costs incurred by a company in order to generate revenue. This includes items like cost of goods sold, marketing costs and wages paid to employees.

Should I use cash-basis or accrual accounting?

There are pros and cons to both cash basis and accrual accounting, so it’s important to understand the differences before you make a decision. With cash basis accounting, you report income when it’s actually received and expenses when they’re paid. This is a simpler way of doing things, but it can be less accurate because you may not have all the information you need to record transactions. Accrual accounting is more complex, but it provides a more accurate view of your financial situation because it takes into account outstanding invoices and bills. It also allows you to track inventory and debtors more effectively. In the end, the right choice for you will depend on your individual business needs.

How do debits and credits work?

Debits and credits are terms used in bookkeeping to track the changes in a company’s finances. Every time a company makes a purchase, it incurs a debit—a financial obligation. Every time the company sells something, it records a credit—an increase in revenue. When all of the debits are added up and all of the credits are tallied, they should be equal; this ensures that the company’s books balance. If they don’t, it means that the company has incurred a net loss or gain over the period covered by those books.

What triggers an IRS audit?

There is no one definitive answer to this question as it largely depends on the individual and the specific circumstances of their tax situation. However, some of the most common reasons that can trigger an IRS audit are discrepancies between reported income and filed taxes, deductions that seem excessive or unusually high, and reports of high levels of business activity or unusually large charitable donations.

Can I lower my tax liability?

There are a few things you can do to lower your tax liability. You can make contributions to certain types of retirement accounts, take advantage of certain tax breaks, and claim certain deductions. Talk to a tax professional to learn more about the ways you can reduce your tax bill.

What's the difference between accounts payable and receivable?

Accounts receivable is a term used in accounting to denote money owed to a company for goods or services that have been delivered, but not yet paid for. Accounts payable is the inverse of accounts receivable, and refers to money that a company owes to its suppliers for goods or services that have been received.

Resources

Resources & Articles For Managing Your  Finances On Your Own

Contact Us

If you would like to speak with someone about your specific situation, please do not hesitate to contact us for a consultation.

info@kpacpa.net

(508) 457-1700

14 Nye Road Rear, Falmouth, MA 02540

M-F: 9am-5pm, S-S: Closed

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