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Table of Contents
About This BookConventions Used in This BookFoolish AssumptionsWhat You’re Not to ReadHow This Book Is OrganisedPart I: Setting Up and Installing Sage 50 AccountsPart II: Looking into Day-to-Day FunctionsPart III: Functions for Plus and Professional UsersPart IV: Running Monthly, Quarterly and Annual RoutinesPart V: Using ReportsPart VI: The Part of TensIcons Used in This BookWhere to Go from Here
Chapter 1: Introducing Sage 50 AccountsLooking at the Varieties of SageInstalling the SoftwareGetting what you need before you get startedMoving to the installation itselfSetting Up with the Active Set-Up WizardRegistering Your SoftwareFinding Out How Easy Sage Is to UseBurying the accounting jargonLooking at the screen layoutIntroducing process mapsNavigating Around SageExploring the browser toolbarNavigating the Task pane, Links list and Module buttonsUsing WizardsChapter 2: Creating Your Chart of Accounts and Assigning Nominal CodesUnderstanding as Much as You Need to about AccountingDabbling in double-entry bookkeepingNaming your nominalsPreparing reportsLooking at the Structure of Your Chart of Accounts (COA)Checking out the default COAIdentifying Balance Sheet codesLooking at Profit and Loss codesLeaving gaps and mirroring codesAccommodating floating nominalsEditing Your Chart of AccountsAmending your Chart of AccountsCreating a new Chart of AccountsChecking Your Chart of AccountsPreviewing errorsLooking at some common errorsChapter 3: Setting Up RecordsChoosing How to Create Your RecordsGetting a quick start using the Record iconSwitching off the process mapsFollowing the wizards brick by brickCreating Customer and Supplier RecordsSetting customer and supplier defaultsDeleting customer and supplier recordsCreating Your Nominal RecordsExploring your nominal recordsRenaming existing nominal recordsAdding a new nominal recordLooking for a nominal recordLooking around a nominal recordDeleting a nominal codeRecording Your Bank AccountsRenaming an existing accountCreating new accountsDeleting a bank recordGetting Your Product Records in OrderCreating a product recordEditing a product recordDeleting a product recordEntering a project recordSetting Up Fixed Asset RecordsChapter 4: Recording Your Opening BalancesTiming Your Switch to SageObtaining Your Opening BalancesEntering Opening Balances Using the WizardEntering your default dateEntering customer and supplier balancesReversing the nominal balances in preparation for entering the Trial BalanceEntering the Trial Balance from your accountantEntering the uncleared transactions for your bank accountChecking opening balances against the Trial Balance from your accountantChecking your dataBacking up your dataManually recording opening balancesRecording opening bank balances manuallyRecording nominal opening balances manuallyPutting in opening balances for productsChecking Your Opening BalancesPrinting an opening Trial BalanceDealing with errors
Chapter 5: Processing Your Customer PaperworkPosting Batch Entry InvoicesCreating Credit NotesRegistering Payments from Your CustomersMatching payments to invoicesGiving credit where due – allocating credit notesRecording payments on accountDeleting Invoices and Credit NotesChapter 6: Invoicing Your CustomersDeciding on an Invoice TypeCreating InvoicesPutting in the detailsGetting to the main attractionFilling in the order detailsGetting down to the footer detailsChecking your profit on a product invoiceCommunicating Is KeyManaging Your Invoice ListPrintingUsing Quick PrintUpdatingDeletingSaving Time while You Ask for MoneyDuplicating existing invoicesRepeating recurring transactionsUsing defaultsChapter 7: Dealing with Paperwork from Your SuppliersReceiving and Posting InvoicesSetting up your receiving systemPosting invoicesGetting CreditAllocating a Credit NotePaying Your SuppliersPrinting a Remittance Advice NoteChapter 8: Recording Your Bank EntriesUnderstanding the Different Types of Bank AccountsKeeping up with the Current and Deposit accounts (1200/1210)Counting the Petty Cash account (1230)Handling your Cash Register (1235)Managing the company credit card (1240) and credit card receipts (1250)Tracking Bank Deposits and PaymentsTransferring Funds between AccountsRepeating Recurring EntriesGoing for consistency with your bank entriesRepeating customer and supplier paymentsMaking regular journal entries – if you dareProcessing and posting recurring entriesDealing with Petty CashFunding petty cashMaking payments from the tinReconciling the petty cash tinPaying the Credit Card BillMaking paymentsReconciling the credit card statementChapter 9: Maintaining and Correcting EntriesChecking and Maintaining Your FilesChecking dataMaking correctionsRe-indexing dataCompressing dataRebuilding dataFinding Ways to Find TransactionsSearching For RecordsBacking Up DataRestoring Data
Chapter 10: Processing Sales OrdersGiving a QuoteAmending your invoice and order defaultsCreating a quotationAllocating and amending stock for a quoteConverting a quotation to an invoice or orderCreating a Sales OrderEntering the sales order detailsDealing with cash salesEditing your orderPutting sales orders on holdDuplicating a sales orderPrinting the orderAllocating Stock to an OrderGoing on automaticAssigning stock yourselfAmending the allocation of stockUsing the shortfall generatorDespatching OrdersCompleting an orderUsing goods despatched notesUsing the despatch facilityRecording a despatch manuallyInvoicing Your CustomersDeleting and Cancelling Sales OrdersChapter 11: Processing Purchase OrdersCreating, Changing and Copying a Purchase OrderCreating a purchase orderEditing your orderDuplicating a purchase orderPlacing the Goods On OrderOrdering via the conventional methodManually placing goods on orderCompleting Your Purchase OrderPrinting Your Purchase OrderGetting the Goods InUsing goods received notesAccepting delivery of everythingTaking in part of an orderCreating an Invoice from an OrderDeleting, Cancelling and Un-Cancelling OrdersDeletingCancellingPutting a cancelled order back on orderChapter 12: Keeping Track of Your ProductsTaking StockAdjusting stock levelsChecking stock activityUsing the stock shortfall facilityUnderstanding a Bill of MaterialsCreating a bill of materialsChecking stock availability for a BOMTransferring stock for a BOMProcessing Stock ReturnsAllocating StockChanging stock allocationIssuing allocated stockChapter 13: Managing ProjectsAppointing a Project’s Status and CostsAssigning statusLooking at costs – types and codesChanging status and costsManaging Project ResourcesCreating or amending a resourceDeleting a resourceTracking Project CostsSharing out project chargesIssuing stock to a projectCounting costs from a supplier invoiceIntegrating POP with project costingAnalysing Project CostsLooking at the project’s activityComparing costs to budgetCharging Your Customers for a ProjectCompleting Your ProjectChapter 14: Using Foreign CurrenciesSetting Up Foreign CurrenciesEntering the exchange rate for a currencyAmending the Countries tableTailoring the Foreign Trader ToolKeeping Trade Status in Mind when Setting Up AccountsProcessing the PaperworkRaising invoices, credit notes and ordersEntering batch invoices and credit notesBanking on Foreign CurrenciesCustomer receipts and supplier paymentsCarrying out a bank transferExpecting changing exchange ratesDoing Revaluations with the Wizard
Chapter 15 : Reconciling Your Bank AccountsRecognising Reasons to ReconcileGetting Ready to ReconcileDoing the Actual ReconciliationTroubleshooting when Your Account Doesn’t ReconcileRounding Up StragglersListing unpresented cheques and outstanding lodgementsRemembering recurring entriesChapter 16: Running Your Monthly and Yearly RoutinesAdding Up AccrualsCounting Out PrepaymentsDepreciating Fixed AssetsWriting down your assetsPosting assets and depreciationEntering JournalsRattling skeleton journalsReversing journalsCarrying Out Your Month-End RoutineTicking off your checklistRunning the month-endClearing stock transactionsClearing the audit trailManaging Cash FlowDoing a Year-End RoutineChapter 17: Running Your VAT ReturnUnderstanding Some VAT BasicsKnowing your outputs from your inputsCracking the codesComparing Sage’s VAT accounting methodsRunning the VAT ReturnCalculating your VATChecking Your VAT ReturnChecking under the standard schemeChecking with cash accountingMaking Manual Adjustments to Your VAT ReturnReconciling Your VAT TransactionsSubmitting Your VAT ReturnPosting your return online via SageSubmitting your VAT return manually via HMRCPosting your refund/payment in SageClearing Down Your VATChanging VAT schemesGoing from standard to VAT cash accounting or the UK flat rateChanging VAT codesMaking the switch from VAT cash or flat rate cash to standard accountingReconciling the sales tax and purchase tax control accountsPosting Scale ChargesReporting Intrastat
Chapter 18: Running Monthly ReportsMaking the Most of Standard ReportsChecking the Chart of Accounts FirstFiguring Out the Financial ReportsTrying for an initial Trial BalanceAccounting for profit and lossWeighing the Balance SheetKeeping an Eye on Your Budget ReportLooking Back with the Prior Year ReportViewing the Audit TrailForgetting the Periods and Going TransactionalGoing by dateBeing number-friendlyRunning the reportsDesigning Reports to Suit YourselfChapter 19: Tackling the Complicated StuffExporting DataSending spreadsheet stuffTransferring Outlook contactsExporting to WordChoosing an alternative export methodImporting DataLinking to Your AccountantSending accounts to your accountantGetting back adjustments and narrativesTrying e-BankingConfiguring your e-BankingOpting for e-paymentsReconciling electronicallyWorking with Document ManagerAdding attachments and filing system referencesDeleting an attachmentChapter 20: Running Key ReportsChecking Activity through the Nominal CodesLooking into Supplier ActivityTracking Customer ActivityChecking Numbers with Supplier Daybook ReportsFinding the Customers Who Owe YouPaying Attention to Your CreditorsHandling Unreconciled Bank TransactionsSurveying Your Profit and Loss – Actual, Budget and Prior YearDoing a Monthly Breakdown of Profit and LossRanking Your Top CustomersChapter 21: Going MobileInstalling Sage 50 MobileSage 50 Mobile DashboardNavigating around Sage 50 MobileCustomersSuppliersMy CompanyMore
Chapter 22: Ten (Okay, Eleven) Funky FunctionsBrowsing for Help with F1Calculating Stuff with F2Accessing an Edit Item Line for Invoicing with F3Finding Multiple Functions at F4Calculating Currency or Checking Spelling with F5Copying with F6Inserting a Line with F7Deleting a Line with F8Calculating Net Amounts with F9Launching Windows with F11Opening Report Designer with F12Chapter 23: Ten (Or More) Wizards to ConjureCreating a New Customer AccountSetting up a New SupplierInitiating a New Nominal AccountCreating a New Bank AccountLaunching a New ProductStarting Up a New ProjectHelping Out at Month-End: Opening/Closing StockFuelling Up: Scale ChargesHelping with Your Bookkeeping: VAT TransferSaving Time: Global ChangesHandling Currencies: Foreign Trader SetupKeeping Others in the Loop: Accountant LinkAppendix: GlossaryCheat Sheet
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Table of Contents
About This BookConventions Used in This BookFoolish AssumptionsWhat You’re Not to ReadHow This Book Is OrganisedPart I: Basic Bookkeeping: Why You Need ItPart II: Recording Day-to-Day Business OperationsPart III: Preparing the Books for Year- (or Month-) EndPart IV: Reporting Results and Starting OverPart V: Payroll PreparationPart VI: The Part of TensIcons Used in This BookWhere to Go from Here
Chapter 1: So You Want to Do the BooksDelving into Bookkeeping BasicsLooking at basic accounting methodsUnderstanding assets, capital and liabilitiesIntroducing debits and creditsCharting your bookkeeping courseDiscovering different business typesPlanning and controlling your activitiesInstituting internal controlsDefining and Maintaining a LedgerUsing Bookkeeping Tools to Manage Daily FinancesTracking salesKeeping stockRunning Tests for AccuracyChecking the cash and bankTesting your balanceDoing bookkeeping correctionsUnderstanding your VATPreparing financial reportsHandling payrollOut with the old, in with the newChapter 2: Getting Down to Bookkeeping BasicsBookkeeping: The Record-Keeping of the Business WorldWading through Basic Bookkeeping LingoAccounts for the Balance SheetAccounts for the Profit and Loss statementOther common termsPedalling through the Accounting CycleUnderstanding Accounting MethodsRealising the limitations of cash-based accountingRecording right away with accrual accountingSeeing Double with Double- Entry BookkeepingGolden rules of bookkeepingPractising with an exampleHave a GoAnswering the Have a Go QuestionsChapter 3: Outlining Your Financial Roadmap with a Chart of AccountsGetting to Know the Chart of AccountsStarting with the Balance Sheet AccountsTackling assetsLaying out your liabilitiesControlling the capitalKeeping an Eye on the Profit and Loss Statement AccountsRecording the profit you makeRecording the cost of goods soldAcknowledging the other costsSetting Up Your Chart of AccountsHave a GoAnswering the Have a Go QuestionsChapter 4: Looking at LedgersDeveloping Entries for the LedgerPosting Sales InvoicesPosting Purchase InvoicesEntering Items into the Nominal LedgerCashbook TransactionsBank paymentsSupplier paymentsBank receiptsCustomer receiptsIntroducing Control AccountsDebtors Control accountCreditors Control accountUnderstanding How the Ledgers Impact the AccountsAdjusting for Nominal Ledger ErrorsHave a GoAnswering the Have a Go QuestionsChapter 5: Discovering Different Business TypesFinding the Right Business TypeSole traderPartnershipLimited Liability Partnerships (LLPs)Limited companiesTax Reporting for Sole TradersExpanding to the supplementary pagesFilling out the self-employment supplementary pagesFiling Tax Forms for PartnershipsPaying Taxes for Limited CompaniesHave a GoAnswering the Have a Go Questions
Chapter 6: Planning and Controlling Your WorkloadIntroducing ChecklistsSorting Out Your Sales InvoicesEntering Your Purchases InvoicesSequential numbering and codingPaying your suppliersChecking Cash Payments and ReceiptsCash paymentsCash receiptsReconciling Your Bank AccountEntering Your JournalsControlling Your Books, Records and MoneyDividing staff responsibilitiesBalancing control costsHave a GoAnswering the Have a Go QuestionsChapter 7: Counting Your SalesCollecting on Cash SalesDiscovering the value of sales receiptsRecording cash transactions in the booksSelling on CreditDeciding whether to offer creditRecording credit sales in the booksCashing Up the Cash RegisterMonitoring Sales DiscountsRecording Sales Returns and AllowancesMonitoring Trade DebtorsAccepting Your LossesHave a GoAnswering the Have a Go QuestionsChapter 8: Buying and Tracking Your PurchasesKeeping Track of StockEntering initial costManaging stock and its valueBuying and Monitoring SuppliesStaying on Top of Your BillsHave a GoAnswering the Have a Go QuestionsChapter 9: Doing Your BankingMaking Sure that the Closing Cash Is RightProducing a snapshot in timeClosing the cash booksReconciling Bank AccountsLooking at a practical way to reconcile your bank accountConsidering credit card salesTracking down errorsUsing a computerised systemHave a GoAnswering the Have a Go Questions
Chapter 10: Adjusting Your BooksAdjusting All the Right AreasDepreciating assetsAccruing the costsAllocating prepaid expensesCounting stockAllowing for bad debtsChecking your Trial BalanceChanging Your Chart of AccountsHave a GoAnswering the Have a Go QuestionsChapter 11: Depreciating Your AssetsDefining DepreciationKnowing what you can and can’t depreciateFiguring out the useful life of a fixed assetDelving into cost basisDepreciating the Value of AssetsEvaluating your depreciation optionsUsing Sage 50 Accounts to calculate depreciationTackling Taxes and DepreciationSetting Up Depreciation SchedulesRecording Depreciation ExpensesHave a GoAnswering the Have a Go QuestionsChapter 12: Adding the Cost of Value Added Tax (VAT)Looking into VATKnowing what to chargeKnowing how much to chargeRegistering for VATPaying in and Reclaiming VATPaying VAT onlineGetting help for small businessesGetting VAT backCompleting Your VAT ReturnFilling in the boxesGlancing at problem areasFiling under special circumstancesCorrecting mistakesPursuing Payments and Repayments
Chapter 13: Producing a Profit and Loss StatementLining Up the Profit and Loss StatementFormatting the Profit and Loss StatementPreparing the Profit and Loss StatementFinding Net SalesFinding Cost of Goods SoldDrawing remaining amounts from your Trial BalanceGauging your Cost of Goods SoldDeciphering Gross ProfitMonitoring ExpensesUsing the Profit and Loss Statement to Make Business DecisionsTesting ProfitsReturn on SalesReturn on AssetsReturn on Shareholders’ CapitalBranching Out with Profit and Loss Statement DataHave a GoAnswering the Have a Go QuestionsChapter 14: Developing a Balance SheetBreaking Down the Balance SheetGathering Balance Sheet IngredientsDividing and listing your assetsAcknowledging your debtsNaming your investmentsPulling Together the Final Balance SheetHorizontal formatVertical formatPutting Your Balance Sheet to WorkTesting your cashAssessing your debtHave a GoAnswers to Have a Go QuestionsChapter 15: Reporting for Not-For-Profit OrganisationsKeeping Only Receipts and Payments AccountsTallying Income and Expenditure AccountsRealising that you need more accountsPreparing Income and Expenditure accountsHave a GoAnswering the Have a Go QuestionsChapter 16: Preparing Your Year End AccountsFinalising the Nominal LedgerZeroing out Profit and Loss statement accountsCarrying over Balance Sheet accountsConducting Special Year-End Bookkeeping TasksChecking customer accountsAssessing supplier accountsDeleting accountsStarting the Cycle Anew
Chapter 17: Employee Payroll and BenefitsStaffing Your BusinessCompleting new starter formsPicking pay periodsDetermining wage and salary scalesMaking statutory paymentsDealing with the payroll administrationCollecting Employee TaxesSorting out National Insurance ContributionsCalculating NICsFiguring out PAYE taxDetermining Net PayTaxing BenefitsPreparing and Posting PayrollCalculating payroll for hourly employeesDoling out funds to salaried employeesTotalling up for commission paymentsSettling up with HM Revenue & CustomsHave a GoAnswering the Have a Go QuestionsChapter 18: Completing Year-End Payroll and ReportsReporting on EmployeesForm P14Detailing benefits on forms P9D, P11D and P11D(b)Reporting PAYE-free earnings on forms P38, P38A and P38 (S)Submitting Summary Information on Form P35Boxing out Parts 1 and 2Ticking off the Part 3 checklist
Chapter 19: Top Ten Ways to Manage Your Business Cash with Your BooksCharting the WayBalancing Your EntriesPosting Your TransactionsKeeping on Top of Credit ControlPaying Bills Accurately and on TimePlanning ProfitsComparing Budget to Actual ExpensesComparing Sales Goals to Actual SalesMonitoring Cost TrendsMaking Pricing DecisionsChapter 20: Top Ten Most Important Accounts for Any BookkeeperCashTrade Debtors (Accounts Receivable)StockTrade Creditors (Accounts Payable)Loans PayableSalesPurchasesPayroll ExpensesOffice ExpensesRetained EarningsAppendix A: GlossaryAppendix B: About the CDSoftwareAuthor-created materialOther softwareAbout the Authors
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Table of Contents
About This BookConventions Used in Financial ReportsFoolish AssumptionsHow This Book Is OrganisedPart I: Accounting BasicsPart II: Getting a Grip on Financial StatementsPart III: Accounting in Managing a BusinessPart IV: Financial Reports in the Outside WorldPart V: The Part of TensPart VI: AppendixesIcons Used in This BookWhere to Go from Here
Chapter 1: Introducing Accounting to Non-AccountantsAccounting Everywhere You LookThe Basic Elements of AccountingAccounting and Financial Reporting StandardsThe emergence of international financial reporting standards (IFRS)Why accounting rules are importantIncome tax and accounting rulesFlexibility in accounting standardsEnforcing Accounting RulesProtecting investors: Sarbanes-Oxley and beyondThe Accounting Department: What Goes On in the Back OfficeFocusing on Business Transactions and Other Financial EventsTaking a Closer Look at Financial StatementsThe balance sheetThe profit and loss accountThe cash flow statementAccounting as a CareerChartered accountant (CA)The financial controller: The chief accountant in an organisationAccounting branches: Treasury, tax and auditChapter 2: Bookkeeping 101: From Shoe Boxes to ComputersBookkeeping versus AccountingPedalling through the Bookkeeping CycleManaging the Bookkeeping and Accounting SystemCategorise your financial information: The chart of accountsStandardise source document forms and proceduresDon’t be penny-wise and pound-foolish: The need for competent, trained personnelProtect the family jewels: Internal controlsKeep the scales in balance with double-entry accountingCheck your figures: End-of-period procedures checklistKeep good records: Happy audit trails to you!Look out for unusual events and developmentsDesign truly useful accounting reports for managersDouble-Entry Accounting for Non-AccountantsThe two-sided nature of a business entity and its activitiesRecording transactions using debits and creditsMaking Sure the Books Don’t Get CookedChapter 3: Taxes, Taxes and More TaxesTaxing Wages and PropertyPutting the government on the payroll: Employer taxesTaxing everything you can put your hands on: Property taxesWorking from homeGetting to Grips with Value Added TaxTaxing Your Bottom Line: Company TaxesDifferent tax rates on different levels of business taxable incomeProfit accounting and taxable income accountingDeductible expensesNon-deductible expensesEquity capital disguised as debtChapter 4: Accounting and Your Personal FinancesThe Accounting Vice You Can’t EscapeThe Ins and Outs of Figuring Interest and Return on Investment (ROI)Individuals as borrowersIndividuals as saversIndividuals as investorsAn Accounting Template for Retirement Planning
Chapter 5: Profit MechanicsSwooping Profit into One Basic EquationMeasuring the Financial Effects of Profit-Making ActivitiesPreparing the balance sheet equationExploring the Profit-Making Process One Step at a TimeMaking sales on creditDepreciation expenseUnpaid expensesPrepaid expensesStock (or Inventory) and cost of goods sold expenseSo Where’s Your Hard-Earned Profit?Reporting Profit to Managers and Investors: The Profit and Loss AccountReporting normal, ongoing profit-making operationsReporting unusual gains and lossesPutting the profit and loss account in perspectiveChapter 6: The Balance Sheet from the Profit and Loss Account ViewpointCoupling the Profit and Loss Account with the Balance SheetSizing Up Assets and LiabilitiesSales revenue and debtorsCost of goods sold expense and stockSA and G expenses and the four balance sheet accounts that are connected with the expensesFixed assets and depreciation expenseDebt and interest expenseIncome tax expenseThe bottom line: net profit (net income) and cash dividends (if any)Financing a Business: Owners’ Equity and DebtReporting Financial Condition: The Classified Balance SheetCurrent (short-term) assetsCurrent (short-term) liabilitiesCosts and Other Balance Sheet ValuesGrowing UpChapter 7: Cash Flows and the Cash Flow StatementThe Three Types of Cash FlowSetting the Stage: Changes in Balance Sheet AccountsGetting at the Cash Increase from ProfitGetting specific about changes in assets and liabilitiesPresenting the Cash Flow StatementA better alternative for reporting cash flow from profit?Sailing through the Rest of the Cash Flow StatementInvesting activitiesFinancing activitiesFree Cash Flow: What on Earth Does That Mean?Scrutinising the Cash Flow StatementChapter 8: Getting a Financial Report Ready for Prime TimeReviewing Vital ConnectionsStatement of Changes in Owners’ Equity and Comprehensive IncomeMaking Sure that Disclosure Is AdequateTypes of disclosures in financial reportsFootnotes: Nettlesome but neededOther disclosures in financial reportsKeeping It Private versus Going PublicNudging the NumbersFluffing up the cash balance by ‘window dressing’Smoothing the rough edges off profitSticking to the accounting conventionsBrowsing versus Reading Financial Reports
Chapter 9: Managing Profit PerformanceRedesigning the External Profit and Loss AccountBasic Model for Management Profit and Loss AccountVariable versus fixed operating expensesFrom operating profit (EBIT) to the bottom lineTravelling Two Trails to ProfitFirst path to profit: Contribution margin minus fixed expensesSecond path to profit: Excess over break-even volume × contribution margin per unitCalculating the margin of safetyDoing What-If AnalysisLower profit from lower sales – but that much lower?Violent profit swings due to operating leverageCutting sales price, even a little, can gut profitImproving profitCutting prices to increase sales volume: A very tricky game to play!Cash flow from improving profit margin versus improving sales volumeA Final Word or TwoChapter 10: Business BudgetingThe Reasons for BudgetingThe modelling reasons for budgetingPlanning reasons for budgetingManagement control reasons for budgetingOther benefits of budgetingBudgeting and Management AccountingBudgeting in ActionDeveloping your profit strategy and budgeted profit and loss accountBudgeting cash flow from profit for the coming yearCapital BudgetingDeducing paybackDiscounting cash flowCalculating the internal rate of returnArriving at the cost of capitalReporting On VariancesFlexing your budgetStaying Flexible with BudgetsChapter 11: Choosing the Right Ownership StructureFrom the Top Line to the Bottom LineWhat Owners Expect for Their MoneyCompaniesPartnerships and limited partnershipsSole proprietorshipsLimited companies (Ltd) and public limited companies (plc)Choosing the Right Legal Structure for Tax PurposesCompaniesPartnerships, limited liability partnerships and sole proprietorshipsDeciding which legal structure is bestChapter 12: Cost ConundrumsPreviewing What’s Coming Down the RoadWhat Makes Cost So Important?Sharpening Your Sensitivity to CostsDirect versus indirect costsFixed versus variable costsBreaking evenRelevant versus irrelevant (sunk) costsSeparating between actual, budgeted and standard costsProduct versus period costsPutting Together the Pieces of Product Cost for ManufacturersMinding manufacturing costsAllocating costs properly: Not easy!Calculating product costFixed manufacturing costs and production capacityExcessive production output for puffing up profitA View from the Top Regarding CostsChapter 13: Choosing Accounting MethodsDecision-Making Behind the Scenes in Profit and Loss AccountsCalculating Cost of Goods Sold and Cost of StockThe FIFO methodThe LIFO methodThe average cost methodIdentifying Stock Losses: Net Realisable Value (NRV)Managing Your Stock PositionAppreciating Depreciation MethodsCollecting or Writing Off Bad DebtsReconciling Corporation TaxDealing With Foreign ExchangeTransaction exposureTranslation exposureComparing performanceTwo Final Issues to Consider
Chapter 14: How Investors Read a Financial ReportFinancial Reporting by Private versus Public BusinessesAnalysing Financial Reports with RatiosGross margin ratioProfit ratioEarnings per share, basic and dilutedPrice/earnings (P/E) ratioDividend yieldBook value per shareReturn on equity (ROE) ratioGearing or leverageCurrent ratioAcid-test ratioKeeping track of stock and debtor levelsReturn on assets (ROA) ratioUsing combined ratiosAppreciating the limits of ratiosFrolicking through the FootnotesChecking for Ominous Skies on the Audit ReportFinding Financial FactsPublic company accountsPrivate company accountsScoring creditUsing FAME (Financial Analysis Made Easy)Chapter 15: Professional Auditors and AdvisersWhy Audits?Who’s Who in the World of AuditsWhat an Auditor Does before Giving an OpinionWhat’s in an Auditor’s ReportTrue and fair, a clean opinionOther kinds of audit opinionsDo Audits Always Catch Fraud?Looking for errors and fraudWhat happens when auditors spot fraudAuditors and the RulesFrom Audits to Advising
Chapter 16: Ten Ways Savvy Business Managers Use AccountingMake Better Profit DecisionsUnderstand That a Small Sales Volume Change Has a Big Effect on ProfitFathom Profit and Cash Flow from ProfitProfit accounting methods are like hemlinesThe real stuff of profitGovern Cash Flow BetterCall the Shots on Your Management Accounting MethodsBuild Better BudgetsOptimise Capital Structure and Financial LeverageDevelop Better Financial ControlsMinimise TaxExplain Your Financial Statements to OthersChapter 17: Ten Places a Business Gets Money FromStock MarketsPrivate EquityBusiness AngelsCorporate Venture FundsBanksBonds, Debentures and MortgagesLeasing and Hire-PurchaseFactoring and Invoice DiscountingGrants, Incentives and CompetitionsUsing the Pension FundChapter 18: Ten (Plus One) Questions Investors Should Ask When Reading a Financial ReportDid Sales Grow?Did the Profit Ratios Hold?Were There Any Unusual or Extraordinary Gains or Losses?Did Earnings Per Share Keep Up with Profit?Did the Profit Increase Generate a Cash Flow Increase?Are Increases in Assets and Liabilities Consistent with the Business’s Growth?Can the Business Pay Its Liabilities?Are There Any Unusual Assets and Liabilities?How Well Are Assets Being Utilised?What Is the Return on Capital Investment?What Does the Auditor Say?Chapter 19: Ten Ways to Get a Better Handle on the Financial FutureSales Forecasts versus Sales ObjectivesDealing with Demand CurvesMaths MattersAveraging Out AveragesLooking for CausesStraddling CyclesSurveying Future TrendsTalking To The TroopsSetting Out AssumptionsMaking Regular Revisions
Appendix A: Glossary: Slashing through the Accounting Jargon JungleAppendix B: Accounting Software and Other Ways to Get the Books in Good OrderSourcing accounting and bookkeeping softwareCheat Sheet
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Table of Contents
About This BookConventions Used in This BookFoolish AssumptionsWhat You’re Not to ReadHow This Book Is OrganisedPart I: Setting Up and Installing Sage 50 AccountsPart II: Looking into Day-to-Day FunctionsPart III: Functions for Plus and Professional UsersPart IV: Running Monthly, Quarterly and Annual RoutinesPart V: Using ReportsPart VI: The Part of TensIcons Used in This BookWhere to Go from Here
Chapter 1: Introducing Sage 50 AccountsLooking at the Varieties of SageInstalling the SoftwareGetting what you need before you get startedMoving to the installation itselfSetting Up with the Active Set-Up WizardRegistering Your SoftwareFinding Out How Easy Sage Is to UseBurying the accounting jargonLooking at the screen layoutIntroducing process mapsNavigating Around SageExploring the browser toolbarNavigating the Task pane, Links list and Module buttonsUsing WizardsChapter 2: Creating Your Chart of Accounts and Assigning Nominal CodesUnderstanding as Much as You Need to about AccountingDabbling in double-entry bookkeepingNaming your nominalsPreparing reportsLooking at the Structure of Your Chart of Accounts (COA)Checking out the default COAIdentifying Balance Sheet codesLooking at Profit and Loss codesLeaving gaps and mirroring codesAccommodating floating nominalsEditing Your Chart of AccountsAmending your Chart of AccountsCreating a new Chart of AccountsChecking Your Chart of AccountsPreviewing errorsLooking at some common errorsChapter 3: Setting Up RecordsChoosing How to Create Your RecordsGetting a quick start using the Record iconSwitching off the process mapsFollowing the wizards brick by brickCreating Customer and Supplier RecordsSetting customer and supplier defaultsDeleting customer and supplier recordsCreating Your Nominal RecordsExploring your nominal recordsRenaming existing nominal recordsAdding a new nominal recordLooking for a nominal recordLooking around a nominal recordDeleting a nominal codeRecording Your Bank AccountsRenaming an existing accountCreating new accountsDeleting a bank recordGetting Your Product Records in OrderCreating a product recordEditing a product recordDeleting a product recordEntering a project recordSetting Up Fixed Asset RecordsChapter 4: Recording Your Opening BalancesTiming Your Switch to SageObtaining Your Opening BalancesEntering Opening Balances Using the WizardEntering your default dateEntering customer and supplier balancesReversing the nominal balances in preparation for entering the Trial BalanceEntering the Trial Balance from your accountantEntering the uncleared transactions for your bank accountChecking opening balances against the Trial Balance from your accountantChecking your dataBacking up your dataManually recording opening balancesRecording opening bank balances manuallyRecording nominal opening balances manuallyPutting in opening balances for productsChecking Your Opening BalancesPrinting an opening Trial BalanceDealing with errors
Chapter 5: Processing Your Customer PaperworkPosting Batch Entry InvoicesCreating Credit NotesRegistering Payments from Your CustomersMatching payments to invoicesGiving credit where due – allocating credit notesRecording payments on accountDeleting Invoices and Credit NotesChapter 6: Invoicing Your CustomersDeciding on an Invoice TypeCreating InvoicesPutting in the detailsGetting to the main attractionFilling in the order detailsGetting down to the footer detailsChecking your profit on a product invoiceCommunicating Is KeyManaging Your Invoice ListPrintingUsing Quick PrintUpdatingDeletingSaving Time while You Ask for MoneyDuplicating existing invoicesRepeating recurring transactionsUsing defaultsChapter 7: Dealing with Paperwork from Your SuppliersReceiving and Posting InvoicesSetting up your receiving systemPosting invoicesGetting CreditAllocating a Credit NotePaying Your SuppliersPrinting a Remittance Advice NoteChapter 8: Recording Your Bank EntriesUnderstanding the Different Types of Bank AccountsKeeping up with the Current and Deposit accounts (1200/1210)Counting the Petty Cash account (1230)Handling your Cash Register (1235)Managing the company credit card (1240) and credit card receipts (1250)Tracking Bank Deposits and PaymentsTransferring Funds between AccountsRepeating Recurring EntriesGoing for consistency with your bank entriesRepeating customer and supplier paymentsMaking regular journal entries – if you dareProcessing and posting recurring entriesDealing with Petty CashFunding petty cashMaking payments from the tinReconciling the petty cash tinPaying the Credit Card BillMaking paymentsReconciling the credit card statementChapter 9: Maintaining and Correcting EntriesChecking and Maintaining Your FilesChecking dataMaking correctionsRe-indexing dataCompressing dataRebuilding dataFinding Ways to Find TransactionsSearching For RecordsBacking Up DataRestoring Data
Chapter 10: Processing Sales OrdersGiving a QuoteAmending your invoice and order defaultsCreating a quotationAllocating and amending stock for a quoteConverting a quotation to an invoice or orderCreating a Sales OrderEntering the sales order detailsDealing with cash salesEditing your orderPutting sales orders on holdDuplicating a sales orderPrinting the orderAllocating Stock to an OrderGoing on automaticAssigning stock yourselfAmending the allocation of stockUsing the shortfall generatorDespatching OrdersCompleting an orderUsing goods despatched notesUsing the despatch facilityRecording a despatch manuallyInvoicing Your CustomersDeleting and Cancelling Sales OrdersChapter 11: Processing Purchase OrdersCreating, Changing and Copying a Purchase OrderCreating a purchase orderEditing your orderDuplicating a purchase orderPlacing the Goods On OrderOrdering via the conventional methodManually placing goods on orderCompleting Your Purchase OrderPrinting Your Purchase OrderGetting the Goods InUsing goods received notesAccepting delivery of everythingTaking in part of an orderCreating an Invoice from an OrderDeleting, Cancelling and Un-Cancelling OrdersDeletingCancellingPutting a cancelled order back on orderChapter 12: Keeping Track of Your ProductsTaking StockAdjusting stock levelsChecking stock activityUsing the stock shortfall facilityUnderstanding a Bill of MaterialsCreating a bill of materialsChecking stock availability for a BOMTransferring stock for a BOMProcessing Stock ReturnsAllocating StockChanging stock allocationIssuing allocated stockChapter 13: Managing ProjectsAppointing a Project’s Status and CostsAssigning statusLooking at costs – types and codesChanging status and costsManaging Project ResourcesCreating or amending a resourceDeleting a resourceTracking Project CostsSharing out project chargesIssuing stock to a projectCounting costs from a supplier invoiceIntegrating POP with project costingAnalysing Project CostsLooking at the project’s activityComparing costs to budgetCharging Your Customers for a ProjectCompleting Your ProjectChapter 14: Using Foreign CurrenciesSetting Up Foreign CurrenciesEntering the exchange rate for a currencyAmending the Countries tableTailoring the Foreign Trader ToolKeeping Trade Status in Mind when Setting Up AccountsProcessing the PaperworkRaising invoices, credit notes and ordersEntering batch invoices and credit notesBanking on Foreign CurrenciesCustomer receipts and supplier paymentsCarrying out a bank transferExpecting changing exchange ratesDoing Revaluations with the Wizard
Chapter 15 : Reconciling Your Bank AccountsRecognising Reasons to ReconcileGetting Ready to ReconcileDoing the Actual ReconciliationTroubleshooting when Your Account Doesn’t ReconcileRounding Up StragglersListing unpresented cheques and outstanding lodgementsRemembering recurring entriesChapter 16: Running Your Monthly and Yearly RoutinesAdding Up AccrualsCounting Out PrepaymentsDepreciating Fixed AssetsWriting down your assetsPosting assets and depreciationEntering JournalsRattling skeleton journalsReversing journalsCarrying Out Your Month-End RoutineTicking off your checklistRunning the month-endClearing stock transactionsClearing the audit trailManaging Cash FlowDoing a Year-End RoutineChapter 17: Running Your VAT ReturnUnderstanding Some VAT BasicsKnowing your outputs from your inputsCracking the codesComparing Sage’s VAT accounting methodsRunning the VAT ReturnCalculating your VATChecking Your VAT ReturnChecking under the standard schemeChecking with cash accountingMaking Manual Adjustments to Your VAT ReturnReconciling Your VAT TransactionsSubmitting Your VAT ReturnPosting your return online via SageSubmitting your VAT return manually via HMRCPosting your refund/payment in SageClearing Down Your VATChanging VAT schemesGoing from standard to VAT cash accounting or the UK flat rateChanging VAT codesMaking the switch from VAT cash or flat rate cash to standard accountingReconciling the sales tax and purchase tax control accountsPosting Scale ChargesReporting Intrastat
Chapter 18: Running Monthly ReportsMaking the Most of Standard ReportsChecking the Chart of Accounts FirstFiguring Out the Financial ReportsTrying for an initial Trial BalanceAccounting for profit and lossWeighing the Balance SheetKeeping an Eye on Your Budget ReportLooking Back with the Prior Year ReportViewing the Audit TrailForgetting the Periods and Going TransactionalGoing by dateBeing number-friendlyRunning the reportsDesigning Reports to Suit YourselfChapter 19: Tackling the Complicated StuffExporting DataSending spreadsheet stuffTransferring Outlook contactsExporting to WordChoosing an alternative export methodImporting DataLinking to Your AccountantSending accounts to your accountantGetting back adjustments and narrativesTrying e-BankingConfiguring your e-BankingOpting for e-paymentsReconciling electronicallyWorking with Document ManagerAdding attachments and filing system referencesDeleting an attachmentChapter 20: Running Key ReportsChecking Activity through the Nominal CodesLooking into Supplier ActivityTracking Customer ActivityChecking Numbers with Supplier Daybook ReportsFinding the Customers Who Owe YouPaying Attention to Your CreditorsHandling Unreconciled Bank TransactionsSurveying Your Profit and Loss – Actual, Budget and Prior YearDoing a Monthly Breakdown of Profit and LossRanking Your Top CustomersChapter 21: Going MobileInstalling Sage 50 MobileSage 50 Mobile DashboardNavigating around Sage 50 MobileCustomersSuppliersMy CompanyMore
Chapter 22: Ten (Okay, Eleven) Funky FunctionsBrowsing for Help with F1Calculating Stuff with F2Accessing an Edit Item Line for Invoicing with F3Finding Multiple Functions at F4Calculating Currency or Checking Spelling with F5Copying with F6Inserting a Line with F7Deleting a Line with F8Calculating Net Amounts with F9Launching Windows with F11Opening Report Designer with F12Chapter 23: Ten (Or More) Wizards to ConjureCreating a New Customer AccountSetting up a New SupplierInitiating a New Nominal AccountCreating a New Bank AccountLaunching a New ProductStarting Up a New ProjectHelping Out at Month-End: Opening/Closing StockFuelling Up: Scale ChargesHelping with Your Bookkeeping: VAT TransferSaving Time: Global ChangesHandling Currencies: Foreign Trader SetupKeeping Others in the Loop: Accountant LinkAppendix: GlossaryCheat Sheet
Sage 50 Accounts For Dummies®, 2nd Edition
Sage 50 Accounts For Dummies®, 2nd Edition
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About the Author
Jane Kelly trained as a Chartered Management Accountant while working in industry. Her roles ranged from Company Accountant in a small advertising business to Financial Controller for a national house builder. For the last few years Jane has specialised in using Sage accounting software and has taught a wide variety of small businesses and employees the benefits of using Sage. More recently Jane has been involved in writing For Dummies books, including Bookkeeping For Dummies, 3rd Edition and Sage One For Dummies.
Author’s Acknowledgments
I hope that this book will help many of the small business owners that currently struggle keeping up-to-date with their finances. I want people to understand that if a system is set up properly, it’s very easy to use and the business gains a huge benefit from it.
I want to thank everyone at Wiley, who have been very kind and supportive, particularly Rachael Chilvers and the rest of the development team, who have turned my words and pictures into the For Dummies book that you see before you.