Page 159 - Budgeting for Managers

142
Client 1
Total
Estimated Income
Client 2
$158,000
Committed
$80,000
$230,000
$70,000
Possible
$70,000
Total Budgeting for Managers Client 3 $300,000
Accrued Income
Accounts Receivable $80,000 0 0 $80,000
Table 9-3. Estimated income and accrued accounts receivable
Closing a Budget Period
At the end of each period, whether it is a month, a quarter, or a
year, the company needs to close the books. In a large firm, the
accounting department does this; you help by making sure that
they have all the information that they need. If you own a small
company, you may do it yourself or you may work with your
bookkeeper. The two most important bookkeeping jobs in clos-
ing a budget period are balancing the accounts and reconciling
the accounts.
Balancing and Reconciling Accounts
Balancing the accounts, as defined in Chapter 2, means making
sure that every transaction is recorded in two accounts—one
where money is taken out (debited) and one where money is
put in (credited). If the accounts do not balance, this means
that we have lost track of some transactions, and we don’t
know where the money is.
The second bookkeeping job is reconciling accounts, as
defined in Chapter 2. We reconcile all of the accounts that
involve a transfer of money outside the company, such as
checking accounts, credit card accounts, accounts receivable,
and accounts payable. We do this for businesses the same way
we do it for our checking account at home. We make sure that
our internal records match the records from the bank or credit
card company. When we reconcile accounts receivable, we
compare our records to bills we sent out to our clients and
checks we received from them. When we reconcile accounts