Best Business Practices for Photographers [98]
I will then enter this into the line item in my accounting software, which only reads Credit Card Payment, and I'll split the payment for $300 into the correct categories in the software. There is now not only a paper trail from the software to the payment, but another one from the payment to the corresponding statement. Further, I have the actual charge receipts filed as well.
While the aforementioned examples are a general overview, let's take a look at a series of charges and walk through the entire process. Consider the following dates, vendors, charge descriptions, and accounting categories for a December MasterCard statement, which closed on January 5th.
12/10 $104.55 – Penn Camera – AA Lithium batteries for flash – 700-01
12/11 $76.80 – Adorama – Two 8GB CF cards – 700-01
12/14 $53.20 – Time Warner – Subscription to Time magazine – 500
12/15 $350.70 – B&H Photo – SB-900 flash – 700-03
12/19 $560.10 – Adorama – Camera lens – 700-03
12/19 $220.50 – Nikon Professional Services – Camera Repair – 700-02
12/23 $375.75 – Canon Professional Services – Camera Repair – 700-02
12/24 $95.60 – Staples – Toner cartridge – 1000-20
12/26 $210.80 – PC Mall – Photoshop upgrade – 1000-30
12/26 $75.20 – Federal Express – Overnight shipping – 1100-02
12/28 $94.50 – UPS – Overnight shipping – 1100-02
12/28 $258.20 – Office Depot – 3-in-1 fax/scanner/copier – 1000-10
The challenge with the above items is that there is information up there that tells you what the purpose of the charge was or what the item purchased was. The credit card statement does not include that level of detail. Figure 11.12 shows how that statement looks.
Figure 11.12
A MasterCard statement.
The receipts over the course of that month, as charges were made in person or online, were filed in a temporary receipts folder by month. When the statement came in from the credit card company, I pulled out the folder and checked which category each charge applied to. For example, there are two Adorama charges here—one for supplies and one for camera equipment purchases. Using the actual receipts, which have descriptions of what the purchases were, I could discern which category each charge applied to. As I reviewed each receipt, I hand-notated on the statement, adjacent to the dollar amount, what accounting code each charge was. Here is one place where the accounting codes are very helpful, as full text category names would just not fit in the margin of the statement. Once these receipts were used for this purpose, then I filed them within the proper category in my filing system, as outlined previously.
Next, using an Excel Spreadsheet, I keyed in each amount in the proper column, breaking down the specifics of the statement itself. In a perfect world, I would pay off the statement completely each month, and usually that is the case, but not always.
Thus, Figure 11.13 shows the Statement Breakdown spreadsheet for this statement.
Note that the statement closing date is January 5th, and the payment is due January 25th. Presume for a moment that I make my payment on January 21st. Figure 11.14 shows how the spreadsheet for the Payment Breakdown would look.
The Payment Breakdown essentially looks identical to the Statement Breakdown, except for the Paid On entry of 1/21, the Total Amount Paid field, as well as the Does Amount Paid Represent Complete Payment of Balance Due? field. As I record that payment in QuickBooks, Figure 11.15 shows how the Splits fields would look.
In this manner, the accounting software has a completely accurate record of the purpose of each charge and category. In the instance where I might make a capital purchase, such as a new computer or a top-of-the-line camera, in the Memo field to the right of the Amount column, I might include information such as Nikon Digital Camera Purchase, Serial #34543, which would later assist in amortizing that purchase. Generally, since the IRS amortization tables for a camera have a camera's lifespan much longer than I keep a camera in service, I write off the entire camera purchase amount