Learners of accounting often ask about the best order to learn accounting topics, a question that usually means one of two things: • Should we learn accounting software before accounting theory, accounting theory before accounting software, or does it matter, or • In what order should we learn accounting topics. The relationship between accounting software and accounting theory comes from our perspective and experience and usually takes one of two forms. Either: • We are working in accounting where we learn accounting software but do not get much book knowledge in accounting theory or • We are an accounting student learning a lot of book knowledge but seeing little computer application. The best way to learn accounting is to learn both accounting theory and application at the same time because the application helps test the theory and helps us learn much faster. The question about accounting topics and what order they should be learned in often comes from people considering going to school for accounting or supplementing their skills. It is often thought that we need to go to school to find out what order we should learn accounting in; Not true. The foundational skills of accounting are very standardized at this point. If we want to subsidize our accounting learning, we have the resources to do so. One method is to look at a basic accounting textbook from any large publisher and use the table of contents as a guide to build and order our learning resources. Large publishers include McGraw-Hill, Cengage, and Pearson. http://accountinginstruction.info/
The secret to learning accounting concepts faster.
In short, Excel.
Many learners do not consider Excel as a learning tool, but more like using a calculator during a test of addition and subtraction, equating the use of Excel to a tool for cheating, rather than a tool for learning.
Nothing could be further from the truth.
If we want to learn accounting concepts better and in far less time, we need to use Excel.
Some learners may reason that because the test does not allow the use of Excel, they should not study using Excel, understandable reasoning, but not entirely correct, and reasoning that will result in much more study time for the same results during test time.
The reason Excel works well as a study tool is not that it makes shortcuts but that it reduces data entry and allows for the testing of concepts without wasting time recalculating.
In other words, the performance of the, usually basic, math skills needing for accounting are not the new thing we are learning. What we are learning is closer to the rules of a new game and how to apply them. Excel allows us to spend our time figuring out the new task of learning how the game works rather than an already mastered task like adding up a list of numbers using a calculator.
For courses designed with Excel exercises in mind see accounting website.
Capital gains are often taxed at a different capital gains rate, it often being favorable to ordinary income rates. We will look at capital gains rates for income taxes 2018 2019
The inclusion of dividends in taxable income and the related tax calculation.
Dividend income can be more confusing then is seems at first glance. From a reporting standpoint dividends are usually easy to see because they will usually be reported on a Form 1099 Div.
The rules related to the tax rate applied to dividends can be more complex. Dividends are the distribution of revenue from a corporation to the owners, to the shareholders.
C corporations are taxed at the corporate level. In other words, the corporate entity is taxed at the time the money is earned as a corporate entity.
The distribution of income to the owner or shareholder is a dividend and it may also be a taxable event. This is what we call double taxation, tax at the corporate level and then tax on the distribution level. There are many arguments for and against taxing dividend income and most revolve around this concept of double taxation.
The result of the debate on double taxation is a reduced tax rate for qualified dividends. In other words, if the dividend distribution qualifies as a qualified dividend it will not be taxed at individual income tax rates, using tax tables, but at lower rates, usually 0% to 15%.
The real seems fairly straightforward and easy to understand, and it is not too bad, but when we start to think about the income tax calculation we can see that is does add substantial amount of complication. We already have a progressive tax system, taxing income at multiple rates and we now need to break out qualified dividends to tax them at rates outside the progressive system.
For more accounting and tax information see accounting website.
Tax Law changes for 2018 will discuss differences in the tax filing for 2018, filed in 2019, compared to the prior year tax filing for 2017 due in 2018.
For specific tax advice consult a tax professional.
There are many changes to the IRS tax code for 2018 in comparison to the prior year. We will look at an overview of the big IRS tax law changes as an introduction to the topic of taxation.
We will start with a discuss of why we should learn tax and how we can approach the learning of tax law to get the best results.
6:36 Changes to form 1040
We will then discus the changes to form 1040. The form 1040 will look much different in 2018 then 2017, Form 1040 being much shorter in 2018. Forms 1040EZ and 1040A have been eliminated. There are new supporting schedules to the form 1040 however.
10:09 Elimination of Personal & Tax Exemption
We will then discuss the elimination of the personal and dependent exemptions for 2018. Exemptions acted similar to deduction in 2017 and we got an exemption for ourselves, our spouse, and dependents. The elimination of exemptions in 2018 will simplify the tax code and may be offset by the increase in the standard deduction and other changes for many taxpayers.
12:36 Increase in Standard Deduction
There has been a substantial increase in the standard deduction in 2018 tax code as compared to the prior year. Because taxpayers must decide to either take itemize deduction or standard deduction, whichever is larger, the increase in the standard deduction will result in less people itemizing. The elimination of the standard deduction is an attempt to simplify the tax code and will have a positive impact to many lower to middle income people.
15:39 Decrease In Tax Brackets
Tax rates have basically decrease is the simple method of describing the changes to the tax tables. Because we have a progressive tax system our taxes are taxed at multiple rates. Many were hoping we would have less tax brackets to simplify the tax code. We still have a complex tax calculation but we did see a decrease in many rates and positive changes that would lower taxes to most any tax payer if the taxable income was the same. In other words there are two factors for tax liability calculation, taxable income and tax brackets. Given the same taxable income the tax brackets would be less in 2018 then in 2017.
18:34 Child Tax Credit Increase
Child tax credit has increase substantially. The increase in the child tax credit will partially compensate or offset the loss of the exemptions for many tax payers. The child tax credit is up to 2,000 for 2018, up from 1,000 in 2017 and much of it is refundable in the 2018 tax changes.
20:40 Limit on state & local tax deductions
State and local taxes have been capped at 10,000, a very controversial change. State and local taxes are itemized deduction on schedule A and include state income tax or sales tax and property tax. Itemized deduction have already been marginalized with the increase in the standard deduction. The state and local taxes are one of the big factors, along with mortgage interest, that push most people into a point of itemizing instead of taking the standard deduction. This change in the tax law could result in many less people itemizing and could increase taxes for sum, especially those in state that have a high cost of living.
24:58 20% Pass-Through Tax Deduction
The 20% pass-through tax deduction tax law change could have a huge impact on individuals that have small business. The law is complicated however, so may not contribute to the simplification of the law, but could help small business save on their tax bill. Business entity types this law covers includes sole proprietors who report on schedule C, LLCs, S corps, and partnerships.
27:30 New Tax Credit For Other Dependents
There is tax credit up to 500 for non qualifying child dependents. After losing the exemption this credit could help compensate or offset the loss, taxpayers still getting tax savings for supporting a dependent.
29:00 Limitation On Home Mortgage Interest Deduction
The tax law changes have limited the amount of home loan for which the related interest can be deducted to 750,000. Most taxpayers will not have a loan over 750,000 but this change may hurt those who live in high cost of living states. We also loss the ability to write off interest for loans where the the house is used a collateral but the money was not spent on the home.
32:36 Elimination of 2% Misc. Deduction & Casualty & Theft Losses
For more accounting help
We will enter a tax entry into our adjusting entry and tax entry Excel worksheet related to the sale of a fixed assets.
Before entering the tax entry we will reverse the adjusting entry into our Excel worksheet. We may be tempted to just enter one entry for the tax adjustment but it is usually easier to reverse the adjusting entry and build the tax entry from the round up.
For more accounting and tax information see accounting website
QuickBooks can be used to track personal bookeeping as well as business bookkeeping.
We can tack personal bookkeeping and generate personal financial statements, balance sheet and profit an loss, by entering data from our bank statement into the QuickBooks file.
Entering bank statement activity will will help us record activity, cash in flows and outflows, income and expenses.
We may also want to add more balance sheet items related to transaction in the past, items like a home, car, or loan.
We will discuss methods for adding balance sheet assets to the personal QuickBooks file.
For more accounting information see accounting website.
New QuickBooks file designed to be used for both business and personal record keeping with the use of QuickBooks class tracing feature.
It is generally recommended to have two QuicKBooks files, one business and one personal, and two bank accounts so that we keep business records as separated as possible. However, some small business owners may want to track personal and business expenses in one QuickBooks files.
We will set up a QuickBooks file designed to track both business and personal expenses and use the class tracking feature to show how such a system could work.
We will turn on the classes preference in QuickBooks Pro Desktop 2019 so that we can us the account classes to group expenses by class.