These are some recommended accounting practices to help you use Free Accounting Software more effectively.
As Free Accounting Software is designed for small business it is set up for cash basis accounting. You record you revenue and expenses as you receive or pay the funds. You can use Free Accounting Software in an accruals basis but it would take a bit of extra work.
Suggestion: account for things on a cash basis it will be easier.
Cash payments and receipts are automatically paid from/receipted to your "Cash at Bank" account. Therefore you should only use this for actual payments taht are made from your organizations main bank account.
Suggestion: If you are running a business get a separate bank account for the business.
If you make payments and receipts in other ways e.g. from your cash on hand account, from your personal funds, you should enter this by a journal. This will allow you to specify the account that it is paid from. It's easy to enter journals in Free Accounting Software.
An example journal for purchasing some stationary for $11.00 including GST. The business owner pays from his own personal funds.
| Journal Line | Amount | Tax Code | Tax Amount | Account |
|---|---|---|---|---|
| 1 | $11.00 | GST Taxable Purchase | $1.00 | Other Expenses |
| 2 | -$11.00 | GST Not Applicable | 0 | Loan to Owner |
Note that the tax goes on the expense line not the funds payment line.
Also note that in the journal screen debits are entered as positive numbers and credits are entered as negative numbers.
An example journal for selling some service. The cash received is not immediately banked but is kept in the organization's petty cash float.
| Journal Line | Amount | Tax Code | Tax Amount | Account |
|---|---|---|---|---|
| 1 | -$55.00 | GST Taxable Sale | $5.00 | Sales Revenue |
| 2 | $55.00 | GST Not Applicable | 0 | Cash on Hand |
Note that the tax goes on the revenue line not the funds receipt line.
Also note that in the journal screen debits are entered as positive numbers and credits are entered as negative numbers.
If you get stuck please feel free to call us on 1300 113 733.