Explanation of T-account, Debit and Credit, and Double-entry Accounting System
March 13, 2010
All accountants know several terms that create basis for any accounting system. Such terms are T-account, debit and credit, and double-entry accounting system. Of course, these terms are studied by accounting students all over the world. However, any business person, whether an investment banker or a small business owner, will benefit from knowing them as well. They are easy to grasp and will be helpful in most business situations. Let us take a closer look at these accounting terms.
T-Account
Accounting records about events and transactions are recorded in accounts. An account is an individual record of increases and decreases in a specific asset, liability, or owner’s equity item. Look at accounts as a place for recording numbers related to a certain item or class of transactions. Examples of accounts may be Cash, Accounts Receivable, Fixed Assets, Accounts Payable, Accrued Payroll, Sales, Rent Expenses and so on.
An account consists of three parts:
- title of the account
- left side (known as debit)
- right side (known as credit)
Because the alignment of these parts of an account resembles the letter T, it is referred to as a T account. You could draw T accounts on a piece of paper and use it to maintain your accounting records. However, nowadays, instead of having to draw T accounts, accountants use accounting software (i.e., QuickBooks, Microsoft Accounting, Peachtree, JD Edwards, Oracle, and SAP, among others).
Debit, Credit and Account Balance
In account, the term debit means left side, and credit means right side. These are abbreviated as Dr for debit and Cr for credit. Debit and credit indicate on which side of a T account numbers will be recorded.
An account balance is the difference between the debit and credit amounts. For some types of accounts debit means an increase in the account balance, while for others debit means a decrease in the account balance. See below for a list of accounts and what a debit to such account means:
Asset – Increase
Contra Assets – Decrease
Liability – Decrease
Equity – Decrease
Contribution Capital – Decrease
Revenue – Decrease
Expenses – Increase
Distributions – Increase
Credits to the above account types will mean an opposite result.
Double-entry Accounting System
A double-entry accounting system requires that any amount entered into the accounting records is shown at least on two different accounts. For example, when a customer pays cash for your product, an account would show the cash received in the Cash account (as a debit) and in the Sales account (as a credit). All debit amounts equal all credit amounts provided the double-entry accounting was properly followed.
Having a double-entry accounting system has benefits over regular, one-sided systems. One of such benefits is that the double-entry system helps identify recording errors. As I mentioned, if one amount is entered only once in error, then debits and credits won’t balance and the accountant will know that one or more entries were not posted fully. Note, however, that this check will help spot errors, but will not identify all cases of errors. For example, equal debits and credits will not identify an error when an amount was posted twice, but was posted to wrong accounts. Keep this in mind when analyzing causes of errors in accounting records.
6 Benefits To Financing A Small Business With A Credit Card
March 13, 2010
Starting a small business without the aid of a credit card can be quite stressful. Since business expenditures can be add-up to significant tax deductions, it is imperative to separate personal expenses from work-related charges. Aside from the tax savings, a business credit card represents expanded options; particularly with the right card.
As with any financial product, not all business credit cards are the same. An annual statement is a popular feature of most business credit cards. Tallying up business related products and services are made simple with the convenience of recorded statements. Nevertheless, a good business credit card should have other features besides a balance sheet. Here are other features, to look for in a small business credit card:
· An exceptional credit line
· A low preferred business APR
· Extra business credit cards for employees
· Customizable business checks
· Custom cards with your business name
· Complimentary online account management
All of the above features can be mission critical to starting and conducting business. Review the following six benefits to finance a new company on a business credit card:
1. Easy Expenditure Tracking
Depending on the credit card company, a record of all transactions may be available annually or by request only. Small business credit cards offering free online account management is an important feature. The ability to check transactions and manage online payments simplifies bookkeeping. The same record can be used during tax-time to calculate profits and earnings.
2. Finance Business Needs With a Low APR
A low preferred business APR can ease the transition of being paid by new clients and covering unforeseen expenses. The financial stresses of starting a new small business can hinder productivity. Be it the cost of renting or buying new equipment, immediate expenditures can wreak costly distress on any business. A business credit card with a low APR can help offset the pangs of paying a balance over time versus right away. The best business credit cards offer a 0% introductory APR.
3. Control Employee Spending
To ensure that employees are conscientious about the company budget, additional business credit cards may control their spending. A business credit card with online management and additional credit cards enables a small business owner to track spending, maintain records and receipts. During conventions, Bill Amato’s sales representatives put in long hours. To compensate and track their meals, each of his employees has a company credit card. Bill uses Advanta business cards because it allows him the ability to control employee expenditures by tracking their spending transactions online.
4. Manage Client Expenses
For simple account management, small business owners can pay for products and services using a business credit card check. For instance, Jane Brody, proprietor of an event management company uses business credit card checks to pay for additional client expenditures. Since the checks are customized to her business and then made payable to the supplier for a specified job and client, she is able to track and tack on any additional fees to each customer’s invoice. Not to mention, each client is billed for late payment transaction fees.
5. Ensure Business Productivity
An exceptional credit line is useful for the fast growing small business that has to cover travel, new technology and other expenditures. A robust credit line can be the difference between staying in business and going out of business. The inability to access a line of credit without depending on a small business loan, can bring a growing company to a screeching halt.
In the case of new franchise owner, Jim Denko his new small business was just beginning to return an investment. On the down side, Jim required a line of credit so that he did not have to dip into the family’s money market account and emergency reserve. Because Jim was qualified for a small business credit card, he was approved with a generous line of credit. The availability allowed him the freedom to test out new inventory for his franchise.
6. Take Advantage of Extras
The ultimate business credit card can be found in the “extras.” For instance, certain business credit cards come with amazing discounts and special incentives. These advantages can add up to savings. Perfect example, Advanta business credit cards, not only come with a healthy credit line, the credit card is devised for small business owners to be successful. Many popular business credit cards feature generous cash back and travel rewards.
Small Business Advice: To minimize confusing your personal cost with the costs of starting a new business, apply for a business credit card that provides you with the tools to run a profitable business.
Florida FHA Loan, Florida FHA home loan, 97% Financing
March 12, 2010
Whether you are purchasing a new Florida home, renovating a house, or simply making your current home more energy efficient, the FHA home loan can be the solution to monetary concerns or problems. Since being established in the early 1930s during the great depression, the Federal Housing Administration has aimed to assist all people to live in their dream homes, be it in Florida or any other Florida county we serve including Broward and Palm Beach Florida. Time tested and government backed, there are few excuses to pass up a FHA loan.
The largest percentage of a person’s life is spent in their Florida house. An FHA loan provides comfort and makes sure that time is well spent. FHA does not lend money to Florida mortgage applicants, however serves as insurance to lenders so you can obtain a mortgage or loan to renovate or purchase a Florida house. With a down payment equipment untouchable by any other mortgage program of 3.5% of the purchase price of the home, and some programs that require no money down, the benefits of an FHA loan outweigh its costs.
Florida is a beautiful state full of beautiful homes. The dream of owning a Florida home may seem difficult at first, but with thanks to the Federal Housing Administration, that dream is not an impossible. FHA mortgage programs can help you become a homeowner with the help of an easy, hassle-free FHA mortgage loan.
Like many home buyers and homeowners looking for a Florida mortgage, 1st Continental Mortgage has weathered the storm and come out stronger and wiser. With a keen focus on core principles and products like the FHA home loan, we’re ready and able to make a broad range of real estate loans throughout Florida. Other advantages to the FHA Home loan include:
Mortgage Programs With Minimal Down payment and Closing Cost
- Down payment less than 3.5% of Sales Price
- 100% Financing options available
- Seller can credit up to 6% of sales price towards buyers costs.
- No cash or bank reserves are required.
- FHA regulated closing costs.
Easier Credit Qualifying Guidelines
- No minimum Credit Score or credit score requirements.
- FHA will allow a home purchase 2 year after a Bankruptcy.
- FHA will allow a home purchase 3 year after a Foreclosure
Top Mortgagge Tips You Need to Know About
March 12, 2010
Buying a home is one of the biggest things that you do in life. You may not have the cash in hand for a one off purchase and for this reason a mortgage will come in handy. It is through this method of purchase that people are able to acquire their dream homes. However, there are so many aspects that you need to consider before you employ this method. You need top tips so that you can stay ahead and make decisions that are informed. First, you need to understand what it is and how it operates. Therefore, the first top tip is to get informed and learn the basics. The following are basics that will empower you as you look forward to making a decision that you will not regret.
• You have to know the term. Term is the period in which you have to repay the mortgage loan. There are those people who prefer a longer term of 30 years while others will go for a shorter term of 10 years. A top tip with this regard is as follows. You need to know that the longer the term, the more interest you will have to pay; go for a shorter term for a low interest rate.
• The other basic to know about is the rate. This refers to interest rate. When you borrow money from a bank, you will have to pay them a certain percentage. This is called the interest rate and it is dependent on different factors. It depends on the loan program, the value of the home, your credit rating and so on. You should settle for a rate that is workable and suitable for you.
• The other mortgage basic is the closing cost. In some cases there will be no closing cost. Costs will include a host of costs and the following is an example. It will include recording fees on different documents, attorney fees and others. However, the vital tip that you must take is that there are lots of closing costs that will arise and you must determine which ones are legitimate and which ones are junk.
• Mortgage brokers are people who have the full experience in the industry and are able to guide a newbie into success with this regard. There are many people who will have reservations when it comes to using brokers. However, it is important for you to recognize their role. For you to make the best decision, you need advice from somebody who has seen it all. In this case brokers will come in handy. This is the main advantage of using them. Brokers can also be your local bank.
There are so many dynamics when it comes to mortgages but knowing a few basics can make all the difference. There are numerous online resources that are able to break down some aspects to give you a clear picture of what they entail. In hard economic times, you need to look at all mistakes that have been made and take home lessons even as you look for a home. This industry continues to help make dreams of owning a home come true; it is not going anywhere.
Mortgages, Tips to Getting the Best Deal
March 12, 2010
The credit crunch has bought good and bad news for home buyers. The good news is that house prices are sliding, bringing homes within the reach of first-time buyers. The bad news is that mortgage loan conditions have tightened up so much that only those with the largest deposits and the cleanest of credit records stand a good chance of getting exactly the loan they need.
In fact despite no change in base rate since the 0.25% cut in April, fixed-rate, tracker and discounted rate mortgage costs have been rising – not for existing customers but for those looking to arrange a new mortgage or a remortgage. Inflation fears, thanks in large part to the soaring oil price, have sent money market interest rates, on which many of these mortgage deals are based, sharply higher.
Getting the best mortgage deal
If you are not a first-time buyer and are thinking of moving, you probably have some equity in your property from past years’ rise in prices. So, unless you bought your current home very recently, you should still be able to move your mortgage without difficulty. While you may get less for the sale of your present home than you might have done last year, you will also be paying less for your new house.
Unless you are trading down a long way to release equity, the general fall in prices should mean that things will even out in the end. You might even find yourself paying less stamp duty if the fall in prices brings the cost of your new home below one of the tax thresholds.
Hard times for new borrowers
The prospects for new borrowers are not so rosy – and this applies to first-time buyers, existing borrowers whose current deals are coming to an end and anyone needing to move house whose current deal is not “portable”, so they will need to take out a new loan.
Over the past few years, fixed-rate mortgages have been all the rage, because even with the arrangement fees that they attract they have worked out cheaper for borrowers. People who opted for short-term fixed rate deals felt they could easily find a new, and maybe even cheaper, rate when their first deal came to an end. Indeed, some people found it tempting to cash in existing mortgage deals and suffer an early repayment penalty because it could be cheaper to remortgage at a lower rate.
Mortgage arrangement fees are higher
To make matters worse, fees are also jumping. According to recent research, the number of fixed mortgages with high fees has rocketed by as much as 1,368% in the past 18 months, as lenders get tough on customers looking for the best deals.
Some 323 fixed mortgages – 34% of the total fixed rate mortgage market – charged application fees of £750 or more. This compares with September 2006 – before the credit crunch hit the UK – when only 22 fixed mortgage deals charged that much.
Average application fees on fixed mortgages have risen by 66% over the same period, from £517.19 in September 2006 to £860.25 now. The highest fee on record 18 months ago was £1,499 on Halifax’s two-year fixed mortgage for homeowners with a 25% deposit or more.
But now the Halifax charges a fee of £3,999 on a three-year fixed deal for its existing customers who have homes worth between £500,000 and £2 million.
Figures from the Council of Mortgage Lenders (CML) have shown that, ironically, fixed-rate mortgage deals grew in popularity in April, with the proportion of borrowers taking out a fixed-rate mortgage up 5% to 59%, compared with 54% in March, the largest proportion since last December.
Go for a longer fix
However, anyone taking out a two-year fixed rate mortgage could be tying themselves in, not just to a deal with high fees, but to the prospect of paying out all over again in just two years’ time. Darren Cook of analysts Moneyfacts, said: “With fears of base rate increases, swap at over 6.3% and rising, and lenders continuing to price more for risk, it is likely that mortgage rates will continue to follow suit. Under these uncertain times, many borrowers are looking to fix their mortgage payments and a five-year deal could become a preferred option rather than the popular two years.
“The current average rates for a two-year fixed deal stands at 6.68%, which equates to a monthly repayment of £1,029.75 on a £150k repayment mortgage. In comparison, the average five-year fixed stands at 6.66%, with a monthly repayment of £1,027.86.
“There is little difference between the initial monthly repayments of these two deals and, in my view, we have now seen the end of loss leading product pricing within the two-year market.
“With the short and medium term economic outlook not looking too promising, homeowners are less likely to move home due to falling property values and banks lowering the maximum loan to values available. There is now new scope for a borrower to possibly take a more prudent approach, to look past previously popular two-year deals and look for longer term stability.”
Beware of tracker mortgages?
It seems like only yesterday that mortgage experts were telling everyone to go for tracker loans. Fixed rates were going up, but the Bank of England base rate – to which most trackers are linked – seemed likely to fall.
The experts are changing their minds, or maybe the pessimists have louder voices, as economists are now warning that the Bank of England base rate may need to increase to keep inflation under control. Opting for a tracker loan could be a bit of a gamble until the outlook for base rates seems more certain.
Bigger deposits attract the best mortgage deals
In its report the CML warned that lenders need not only to pass their own higher borrowing costs on to borrowers, but they also need to protect themselves in case house prices fall further. Therefore some lenders have been putting up the cost of mortgages for borrowers who can put down only a small deposit.
According to Moneyextra.com’s most recent monthly review of the mortgage market, the average loan-to-value (LTV) being considered by first-time buyers in May was just under 82%. However, many lenders are routinely restricting borrowers to loans of no more than 75% of the value of the property they want to purchase, while some will only offer their “best” rates on 60% LTVs. There are now none of the plentiful 100% loan deals that were on offer at the start of the year.
Robin Amlôt, senior editor of Moneyextra.com, said: “First-time buyers are being pushed out of what’s left of the housing market – being asked for deposits that could run to several tens of thousands of pounds.”
The CML said that new buyers put down an average of 13% during the month, the highest figure since November 2004 and up from 11% in March.