Prepaid Expenses Balance Sheet
Prepaid Expenses Balance Sheet – When you own a business, it may be hard for you to figure out your profit. In fact, it’s quite easy to keep track of with good bookkeeping techniques such as balance sheets. A balance sheet helps account for liabilities and assets. Liabilities are what you need to pay for, or your debt, while assets are anything you own or have prepaid. When calculated, your balance sheet provides crucial profit information when prepared right.
Using a bookkeeping company is a great way to be sure you’ve included all liabilities and assets. If you decide to work with a bookkeeping company, rest assured all liabilities and assets will be taken into account, assuring the balance in the balance sheet .With over 30 years of experience, owner and founder Manal Oliver has the expertise and knowledge you need to correctly calculate your profit.
When calculating assets, it’s important you include all future expenses that you’ve paid for in advance, also known as prepaid expenses. When including assets on your balance sheet, remember you’re putting costs that haven’t expired or aren’t used yet.
What are the top 5 prepaid expenses?
There are five prepaid expenses that are commonly used, such as insurance coverage, but your Miami Beach bookkeeping company reminds you to include less common ones, like supplies, taxes and other contracts. It’s necessary you include all prepaid expenses to calculate the exact profit.
1. Rent should be the first, must-include, prepaid expense on your balance sheet. Aside from insurance, rent is probably the most expensive prepaid expense you’ve got. You want to spend less than 10% of your budget on rent. Keep in mind though, commercial leases aren’t calculated like residential leases.
Commercial rent includes both usable square footage and rentable square footage. Residential leases are calculated by comparing other properties in the area while commercial leases, on the other hand, are determined by square footage. As of 2013, the average cost per square foot was $23.23 nationwide.
To calculate rent in commercial real estate, there are several types of square foot measurements used. The Building Owners and Managers Association International (BOMA) provides the standard measurement guidelines for commercial spaces in the U.S., including:
-Gross Areas of a Building
-Multi-Unit Residential Buildings
BOMA standards include “Rentable Square Footage” rather than “Usable Square Footage.” Whatever space you occupy as a tenant, is considered usable square footage. Rentable square feet, on the other hand, is everything you use as a tenant, that other people don’t use. Usable square feet are calculated by adding up all the space of the building that people use such as common areas including hallways, stairwells, elevators, and lobbies.
2. Insurance coverage. Insurance coverage is something every business owner needs. Your Miami Beach bookkeeping company suggests you call a variety of insurance companies to get the cheapest and most cost-effective insurance. Some top commercial insurance companies include Nationwide, Geico, State Farm and Progressive.
3. Legal services. Hiring a legal team can get hectic. Figuring out how much your lawyer costs can be even more chaotic. Calculating legal services is easily determined when a bookkeeping company that includes virtual bookkeeping or outsourced bookkeeping is used. Here at Your Bookkeeping Department, we suggest virtual or outsourced bookkeeping, which gives you ease of mind.
4. Inventory is something that needs to be purchased ahead of time. As a business owner, you need to have your inventory well-stocked before you can begin to sell your products. You want your products on hand when someone goes to your store or orders something online.
5. Equipment is also a necessary prepaid expense. Things like computers, desks, display cases, telephones, and more must be included on your balance sheet. If you’re not sure about what to include, you can always hire a virtual bookkeeping company to keep you organized.
Keep track of Prepaid Expenses
Keeping all prepaid expenses on track is necessary for all business owners. Most agree that rent and insurance are the most expensive prepaid items on a balance sheet. This is because there are a variety of charges for both rent and insurance. It’s necessary to correctly break down all items to be sure your profit is properly calculated. Hiring the right virtual bookkeeping company is the most effective way of calculating your business’ profit without having to include an expense for staff.