There is a well known saying that “you got to spend money to make money”.  This may be true for many businesses who are in operation today.  It is certainly true for our online accounting software.  Luckily, most governments and jurisdictions allow businesses to submit expenses as “deductions” to the total revenue before filing taxes.

Keeping track of expenses is one of the most important bookkeeping activities a business will do.  Not only does this allow a business to write off tax deductible expenses, it also allows a business to keep track of their spending.  This is where many small businesses often run into trouble, they do not realize how much money they were spending in comparison to their income until it is too late.

Keeping track of expenses in Clarity Accounting is easy.  The purpose of this help file is to provide some clear instructions on how to enter expenses into Clarity Accounting.

There are 2 places to enter expenses within Clarity Accounting:

1. Directly from the Dashboard
2. In the “Expense” section
   

Clarity Accounting Enter Expense View

There are 4 different “Tabs” on the Enter Expense data entry box:

1. Enter Expense: for straight forward expenses
2. Enter Bill: for bills with a due date to be tracked as an Aged Payable; also for multi-currency support
3. Pay Bill: for recording bill payments when a bill has been paid
4. Detailed: a section for users to record all expense & bill related transactions

Data Entry Fields

Date: when did you purchase an item or received a bill?
Vendor: where did you buy the expense item from or who sent you a bill?
Invoice number: a transaction number that is automatically generated unless you have received an invoice with a specific invoice number.
Expense Account: what is the expense category? For example, buying coffee for a client meeting at Starbucks would be considered a “meals and entertainment” expense.  You are welcome to add as many expense accounts as you wish.
Description: Optional field for you to enter notes to yourself about a bill or expense.
Quantity: how many of the same item did you purchase? This field always default to a quantity of one.
Price: what is the actual cost / price of your expense item?
Sales Taxes: If you are tracking sales taxes you can get back from the government with your business related expenses, you can enter the tax here and Clarity Accounting will keep track of how much sales taxes the government owes you.

Sample Case Study

A small business owner ran out of black printer ink cartridges for his printer and he went to a local stationary supply store called Staples and spent $29.99 + 5% sales taxes on ink cartridges.  He went on October 23, 2008 and used his business Visa card to make the purchase.  Ink cartridges are considered to be a office expense since it is something that is consumable (by the printer, not the business owner of course).  Equipments such as computers and monitors cannot be considered an office supply expense.

Information being tracked on Clarity Accounting

Based on this specific expense data, Clarity Accounting tracks how much a business spends on a particular vendor, how much money was spent using the Visa (or deducted from other bank accounts), the total amount spent on each “expense account” (for tax preparation purposes), the amount of sales taxes paid for business related expenses, as well as how much the business is spending in total (this can be found in the “Profit and Loss” report).

How is this information useful?

Recently a client told me that she had no idea she spent so much money on networking.  While networking is a valid form of marketing, different networking groups yield different results.  This allowed her to focus her time on only one networking group that yielded the most results for her so far.

A business can also look at how much money they are spending on advertising and marketing in comparison to their income in a given period of time shortly after a campaign to assess the effectiveness of a marketing or advertising campaign.  We allow clients to choose a date range when viewing their profit and loss statements to see their income and expenses in a given period of time.

Need more help?

If you require more help with figuring out how to enter expenses in Clarity Accounting, please do not hesitate to contact us.  We will always respond within 1 business day or sooner.

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This entry was posted on Thursday, October 23rd, 2008 at 4:01 pm by may and is filed under Bookkeeping, Expense Records, General Instructions, Track Expenses. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.