1. This Ain’t Your Momma’s Quickbooks! Effective Accounting Management with TotalFBO Presented by: Janice M. Pratt Sr. Research Analyst Horizon Business Concepts, Inc. 2010 TotalFBO® User Conference

2. Do You Do GAAP? Generally Accepted Accounting Principles Generally Accepted Accounting Principles accounting rules used to prepare, present, and report financial statements accounting rules used to prepare, present, and report financial statements includes local applicable Accounting Framework, related accounting law, rules and Accounting Standards includes local applicable Accounting Framework, related accounting law, rules and Accounting Standards

3. The Philosophy of Accounting The conceptual framework for the professional preparation and auditing of financial statements and accounts. The conceptual framework for the professional preparation and auditing of financial statements and accounts. The issues which arise include: The issues which arise include: the difficulty of establishing a true and fair value of an enterprise and its assets;the difficulty of establishing a true and fair value of an enterprise and its assets; the moral basis of disclosure and discretion;the moral basis of disclosure and discretion; the standards and laws required to satisfy the political needs of investors, employees and other stakeholders.the standards and laws required to satisfy the political needs of investors, employees and other stakeholders.

4. GAAP is Composed of: 4 basic Assumptions 4 basic Assumptions 4 basic Principles 4 basic Principles 4 basic Constraints 4 basic Constraints

5. GAAP Assumptions Business Entity Business Entity Separate from personal or other business financesSeparate from personal or other business finances Going Concern Going Concern Business is expected to continueBusiness is expected to continue Monetary Unit Monetary Unit Stable currencyStable currency Time-period Time-period Reporting divided into periodsReporting divided into periods

6. GAAP Principles Cost Cost Verifiable, unbiased asset valuesVerifiable, unbiased asset values Revenue Revenue Income reported when earned, not when cash received (Accrual Accounting)Income reported when earned, not when cash received (Accrual Accounting) Matching Matching Expenses reported when related income reportedExpenses reported when related income reported Disclosure Disclosure Information disclosed should be enough to make a judgment while keeping costs reasonableInformation disclosed should be enough to make a judgment while keeping costs reasonable

7. GAAP Constraints Objectivity Objectivity Financial Statements to be backed up by objective evidenceFinancial Statements to be backed up by objective evidence Materiality Materiality Reported information items should be significantReported information items should be significant Consistency Consistency Use same methods and principles from year to yearUse same methods and principles from year to year Prudence Prudence Choose method least likely to overstate assets and incomeChoose method least likely to overstate assets and income

8. GAAP is Changing Originally promulgated by AICPA Council Originally promulgated by AICPA Council American Institute of Certified Public AccountantsAmerican Institute of Certified Public Accountants Now codified and updated by FASB Now codified and updated by FASB Financial Accounting Standards BoardFinancial Accounting Standards Board Soon to be replaced with IFRS Soon to be replaced with IFRS International Financial Reporting Standards also subscribed to by most European countriesInternational Financial Reporting Standards also subscribed to by most European countries

9. TotalFBO designed to GAAP Double-entry, accrual system Double-entry, accrual system Standard chart of accounts design Standard chart of accounts design Control accounts supported by detail ledgers Control accounts supported by detail ledgers Secure audit trail Secure audit trail Work in Process posting Work in Process posting Date-sensitive, Date-controlled Date-sensitive, Date-controlled Business entity database/license structure Business entity database/license structure

10. Spreadsheet Accounting Can be cash or accrual Can be cash or accrual No balancing required No balancing required No standard chart of accounts No standard chart of accounts No Work In Process Posting No Work In Process Posting Controls missing or easily overriden Controls missing or easily overriden Designed to be uploaded to “professional” system for CPA review Designed to be uploaded to “professional” system for CPA review Assumes purpose is mainly for tax preparation task Assumes purpose is mainly for tax preparation task (Quickbooks, Excel, Etc.)

11. Professional Accounting Use Professional Accounting System to achieve professional results Use Professional Accounting System to achieve professional results TotalFBO, MAS90, Great PlainsTotalFBO, MAS90, Great Plains Use Spreadsheet Accounting System when accountability and growth are not considerations Use Spreadsheet Accounting System when accountability and growth are not considerations Clubs, personal finances, analysisClubs, personal finances, analysis

12. Who will do your accounting? Accounting clerk Accounting clerk Bookkeeper Bookkeeper Full-charge Bookkeeper Full-charge Bookkeeper Accountant Accountant CPA CPA CFO CFO Your spouse Your spouse

13. Accountant Training Daily business information & statement preparation Daily business information & statement preparation Pricing decisions & business modeling Pricing decisions & business modeling Tax preparation Tax preparation Auditing Auditing Specialty areas (international, oil & gas, securities) Specialty areas (international, oil & gas, securities) Financial planning Financial planning

14. Should you hire a CPA? For specialty areas (planning & income tax prep) For specialty areas (planning & income tax prep) For audits For audits For business changes (acquisitions, sales, legal entity choices) For business changes (acquisitions, sales, legal entity choices) For certain Analysis projects For certain Analysis projects For daily bookkeeping management For daily bookkeeping management For Internal financial statement prep For Internal financial statement prep For account reconciliations For account reconciliations For sales taxes For sales taxes For payroll For payroll YES!NO!

15. “Full-Charge” Bookkeeper Understands double-entry accrual system Understands double-entry accrual system Can prepare financial statements with integrity Can prepare financial statements with integrity Fully skilled in sub-ledger management Fully skilled in sub-ledger management Can manage accounting staff Can manage accounting staff Can see the “big picture” Can see the “big picture” Can customize POS, chart of accounts, and other systems to produce appropriate information Can customize POS, chart of accounts, and other systems to produce appropriate information

16. Elements of Accounting System General Journal General Journal General Ledger General Ledger Detail Ledgers: Detail Ledgers: Accounts ReceivableAccounts Receivable Accounts PayableAccounts Payable Bank AccountsBank Accounts Payroll LedgerPayroll Ledger Inventory ChangesInventory Changes Asset ManagementAsset Management Supporting Documentation Supporting Documentation

17. Financial Reports Journals Journals Account Details Account Details Trial Balance Trial Balance Bank Account Reconciliations Bank Account Reconciliations Accounts Payable Aging Accounts Payable Aging Accounts Receivable Aging Accounts Receivable Aging Physical Inventory Valuation Physical Inventory Valuation Payroll Register Payroll Register Asset Valuation Asset Valuation Budget Comparisons Budget Comparisons

18. Financial Statements Balance Sheet Balance Sheet What is the value of the business at any POINT in time? Includes Assets, Liabilities, Net Worth Income Statement (Profit & Loss) Income Statement (Profit & Loss) What is the income relative to costs, expenses and taxes for a specified PERIOD of time? Cash Flows Cash Flows What were the sources of cash into the company and how/where was it spent?

19. Those Debit & Credit Thingeys... The heart of “Double Entry” accounting The heart of “Double Entry” accounting LEFT and RIGHT sides… OF WHAT? LEFT and RIGHT sides… OF WHAT? What’s the point? Isn’t it just double work? What’s the point? Isn’t it just double work? Assures Math accuracy Shows Effect on business and Source of the change

20. Balancing the Books ASSETSCashReceivablesInventory Building & Equipment “Goodwill”LIABILITIESPayablesLoansEQUITYInvestment Net Profit or Loss: INCOMESalesInterest Asset Sales EXPENSESCostsExpensesPayrollTaxes Dr Cr Dr

21. Evaluating Performance Are financial statements timely? Are financial statements timely? Are they complete? Are they complete? Are they accurate? Are they accurate? Does department seem “always behind”? Does department seem “always behind”? Is one staffer working too hard? Is one staffer working too hard? Can you get answers to business questions? Can you get answers to business questions? Is employee flexible as business changes? Is employee flexible as business changes?

22. What’s the Real Problem? Are YOU requiring the wrong things? Are YOU requiring the wrong things? Is system unnecessarily complex? Is system unnecessarily complex? Have you understaffed? Have you understaffed? Is equipment/space outdated? Is equipment/space outdated? Is employee lost/overwhelmed? Is employee lost/overwhelmed? Is better training the answer? Is better training the answer?

23. Get Up to Speed Careful hiring and Promotion Practices Careful hiring and Promotion Practices Bookkeeping Courses Bookkeeping Courses www.totalfbo.com/HBCSupport/Educate.aspx www.totalfbo.com/HBCSupport/Educate.aspx www.totalfbo.com/HBCSupport/Educate.aspx Horizon training ?? Horizon training ??