8. INPUT: Monthly [Revenue & Expense] Transactions from period ending Bank Statements

[M/S -8] is one-of-four software segments required to be populated with its respective data each month to fully utilize all the functionality features designed into FastBooks Solutions Software which includes generating monthly and annual business financial statements.

A principle design structure throughout the software is only [yellow highlighted cells] are formatted for entering [data].  All other cells are protected, and cannot be changed or altered in any way.  Therefore; entering incorrect data is the only possible mistake or error a user can make when using FastBooks Solutions Service-Based Service Business Accounting Model.

The best first step to quickly gain a basic understanding and appreciation for the business purpose of [M/S -8] is to review the [2] images below.  The first image populated with the [simulated-business-data] contained in the Practice Software. 

The second is an image of how [M/S -8] appears before populating any [data] in the software.  Take note of the protected cell coordinates designed to display calculations or information appear as blank cells.  Displaying cell coordinates not requiring a calculation as a blank cell is a principle design structure throughout the software to by design limit the [number of numbers] displayed in each respective software segment.  For example; cell coordinates designed to display actual vs. forecast better or worse calculations will appear as blank cells when the software does not contain a future forecast.Model Segment 8 of 18 -FastBooks Solutions Microsoft Excel Service Business Accounting Model

Left click on the image above to open an enlarged image in a new tab.

Click the link to open [M/S -8] in an Adobe PDF file:

Click the link to open [M/S -8] in an Excel file:Model Segment 8 of 18 -FastBooks Solutions Microsoft Excel Service Business Accounting Model

Left click on the image above to open an enlarged image in a new tab.

Click the link to open [M/S -8] in an Excel file:

Click the link to open [M/S -8] in an Excel file:

The Excel file will open in a Protective View. The [Enable Editing Button] on the top row must be clicked first to save an Excel file on a device. The carefully structured screen and scrolling design of the software segments in FastBooks Solutions were all formatted for viewing in the Excel Auto Hide Ribbon screen viewing mode.   Click on the first icon on the right top corner of Excel to change the screen display view to this designed screen display option. 

8- [Enter] Monthly Revenue & Expense Transactions from Monthly Bank Statement

The purpose of software segment 8 is to collect the businesses monthly revenue and expense transactions. To keep things very simple; the FastBooks Solutions Software utilizes the same line numbering and line descriptions as the I.R.S form 1120S Income Tax Return for an S-Corporation for the businesses [chart-of- accounts].  

From a big picture perspective; this allows the business to classify expenses using the same expense account classification required by the I.R.S tax statement. FastBooks Solutions clients can customize their licensed copy of FastBooks Solutions Software to use Federal Tax Return 1120-S, 1120, or Schedule C, Form 1040. The chart-of-accounts only includes the line numbers and line descriptions of the tax-deductible expense classifications which apply to a service-based business 

FastBooks Solutions Software automatically populates and updates the tax statement after each month of business [data] is entered. The tax statement generated in software segment [6] will correspond to the year-to-date business income statement, which is the last month of [data] entered.

The revenue and expense data entered in [S/S -8] automatically populates three unique industry appropriately structured presentations of the income statement. These software segments restructure the traditional income statement into 4 activity-based categories. This unique income statement format is more appropriate for a service-based business for an easy understanding of the financial drivers that affect profitability, as well as identification of unusual items that may require further review.

The three income statement software segments generated within the FastBooks Solutions Software also include simple to learn, easy to use preset “what-if” functionality designed to perform future forecasting and assist in making logically based mathematically sound business decisions

In contrast; the only income statement the QuickBooks financial software program can create is in a traditional income statement format or a trial balance format. This traditional income statement format used by all publicly held businesses who are required to issue both quarterly and annual financial statements and operate under the rules and regulations required by all companies in the public sector of the economy. The traditional “Revenue Minus Cost-of-Sales=Gross Profit” Income Statement format created in QuickBooks is not an appropriate Income Statement format for any Service-Based Business.

There is no logical reason for a service based business to classify and group business expenses in the manner required to determine a “Gross Profit subtotal” line within the structure of the income statement. A subtotal calculation of “gross-profit” has no value for a service-based business and is not a requirement in any of the I.R.S. federal tax forms for businesses who file business annual federal tax filings under the “cash method of accounting.”

Also; the departmentalized expense classification format used in traditional business income statements offers little help in making business decisions for a service-based business. In fact; it is more likely to be more misleading than add any informational value when utilized for making business decisions.

One of the many unique features included in the FastBooks Solution Software is a metric included in [S/S -1] which calculates the incremental W2 earnings compensation change for the business owners’ compensation for any “what-if” scenario entered in the software. In theory; this is the essential point answer any business owner would want to know for any business decision.

You can quickly “listen” to the instructions for populating Software Segment [8] given below, in the Audio-Bar above:
Below are the simple instructions for entering "most" of your businesses monthly [revenue-and-expense] transactions into model-segment [8] at the end of each calendar month of business: 
It's this easy! Most of the business facts and figures you will require will be included on your businesses monthly S-Corporation bank account statement. In addition to the FastBooks Excel-Based-Business-model, there may be additional business software functionality that will still be required by a business to handle typical business tactical tasks that fall outside the scope of the unique niche business functionality provided in the FastBooks-2016 Business-Software-Model.
 
 If the business uses some method of software to handles some of their possible current normal tactical business tasks; for example, accounts receivable, billing, appointments, etc. there's no need to change anything. If this tactical workload is being maintained in QuickBooks or similar business software, keep using that software for completing this tactical business task.
 
 Under the cash-method of accounting, accounts receivable transactions are not recognized. Since revenue is recognized after payment is received, bad debt does not exist. In other words, an uncollectible accounts receivable from a customer is not a taxable business expense if it was never recognized as revenue in a prior business period. Therefore; accounts receivable business transactions do not create any income statement expense transactions under the cash-method of accounting.
If your business uses QuickBooks or any other similar business software for example, maintaining a fixed asset register to serve as a source document for calculating monthly depreciation expense. This basic fixed-asset functionality feature that is included in most business software calculates monthly depreciation expense and maintains a record of the businesses fixed assets. Once again; If this tactical workload is being maintained in QuickBooks or similar business software, keep using that software for this tactical work.
 
 Next; use your bank online bill-paying software to serve as your businesses accounts payable software. This free software will handle your accounts payable requirements with a lot less investment in time and require a lot less steps then processing checks and paying bills then any business software you are currently using now to perform this tedious business tactical task.
 
 The purpose of model segment eight within the FastBooks business model structure is to collect the businesses monthly revenue and expense transactions. As part of the FastBooks chart-of-accounts structure, the same tax line item expense classifications and line numbering that is included in the 1120 S-Corporation tax return is used for chart-of-accounts expense classifications. This allows for easy simultaneous classification and recording of expenses and filing annual federal tax returns.
 
The data entered into model segment eight generates four unique presentations of the business income statement, which provides a unique methodology for reviewing monthly financial results.

The monthly revenue and expense transactions should be entered in model segment 8 in hold dollars. All the revenue and expense accounts included in the chart-of-accounts are included and are structured in a trial-balance revenue minus expense format; for ease of data input.
 
Model segments one-to-five utilizes an Activity-Based-Income-Statement format and presents information (when appropriate) in a rounded-dollar format. The Activity-Based-Income-Statement format used in these eight model segments, for its respective tactical or strategic conjunctional model purpose separates the income statement into four major activity based categories.
 
This top level income statement format offers a quicker, clearer and better focused understanding of the businesses financial drivers that are more vital, and have a greater impact on the profitability of service-based-businesses, as well as for the identification of unusual items that may require further investigation.

The first and second “yellow” data input cells on line numbers 10 and 11 collect the businesses monthly Revenue/Collections. The total revenue for both service-work-groups on line 13 is also displayed on line 1c “Net Receipts or Sales” on the U.S. Tax Returns for an S-Corporation that is automatically populated and updated with every month of data entered.

Bank statements have a section called "Deposits to Your Account." Look at the total for check deposits and the total for credit card deposits. Make sure no other deposits other than customer payments have been included in your monthly revenue total that is entered in model segment 8.
 
It’s a good general practice to have as few "non-customer-payment deposits" as possible in this business bank account.) Add these check deposits and credit card deposits (excluding non-customer payments) to any cash payments to calculate the monthly data requirement for business revenue/sales.
 
Your bank statement will have two other sections:
 
Checks Paid from the Account
 
Other Debits from the Account (including online vendor payments)
 
The monthly revenue and expense business transactions taken from these two standard bank statement segments is the only source document that you will require to populate "most" of the 30 available expense categories and the 2 revenue categories in order to fully populate model segment 8 the of end of each business calendar month. Use as few expense categories as possible. Using Excel, you can add numbers and include notes in cells for informational related notes. Most transactions on the bank statement will be easy to categorize into one of the 30 available expense categories. Populating model segment 8 using your bank statement makes for a great financial review.
 
Make notes on the bank statement to simplify the process. On your bank statement, write down the Financial Input expense line number used for each expense transaction. Yellow input cells can be used to add numbers or perform calculations. Any expense category, like "Travel and Entertainment), could contain several expense transactions added together. Most transactions are easy to logically categorize. For instance, if you are running payroll twice per month, you'd have two payroll expense and payroll tax transactions in the bank statement.
 
Remember to only include payroll, payroll tax expense, and vendor or business expense transactions in the its respective expense account classifications when entering the monthly business expenses at the end of each calendar month. There will likely be other transactions that are not tax-related expenses, such as a monthly loan payment related to the purchase of the business. Only the interest portion of the payment is a tax-related expense. 

A transaction for a credit card payment can require a closer look. Some credit card companies group transactions into generic expense categories that can be used to enter as the monthly total for its respective expense classification. The most used transactions on the business card are most likely Travel, Entertainment or Auto. Other than payments for business-related transactions, it is good practice to use as few transactions as possible to flow through this business bank account.
 
After you have reviewed all transactions in this section of the bank statement, each transaction line on your bank statement should have either the expense account chart-of-account number line or a brief note about the nature of the transaction.
 
Next, add all transactions that have chart-of-account expense account numbers. The total should match the Total Expense reflected on line number 83 in model segment 8. If both numbers agree, most of the monthly business expenses have been successfully recorded into model segment 8.
 
The few business tax deductible monthly expenses that do not flow through the businesses monthly bank statement; a few good examples would be depreciation or amortization expense, monthly Interest expense related to a business loan should all have a source document. The information from this source document should be used to record its respective monthly business expense in model segment 8 in order to complete the process of entering the businesses revenue and expense transactions at the end of each calendar month.

A good way to confirm the work is to add the transactions in both bank statement sections that have no expense notes. The last step is to add both transaction totals to ensure they agree with the combined totals of both bank statement Segments.
 
On the bank statement, note the total of both sets of transactions for a grand total and do the same for both bank statement segment sub-totals that included all debit transactions. Performing this additional audit step assures that all transactions have been taken into consideration.
 
When selecting expense categories for each debt transaction, most tax-related expense categories have the same impact in the total tax calculation. In other words, rent expense is no different than utilities expense for calculating taxable income. Incorrectly assigning a debt transaction to the wrong expense category is not a big deal. However, be as consistent as possible each month so expense items are correctly and consistently classified in model segment 8.
 
Using this simpler-methodology to populate the FastBooks.Solututions [excel-based-model] replaces the need to generate  conventional financial-statements: