Avionics News November 2013 - 29

Keeping track of federal, state and local taxes is part of
a CPA's responsibilities, and this includes taxes specific to
aviation. For example, according to Karen McKinnon, CPA
and president of CE Avionics in Sanford, Fla., the Sunshine
State of Florida just changed the minimum weight of fixedwing aircraft that are exempt from its aviation sales tax, from
15,000 pounds to 2,000 pounds.
Tax guidance is just part of a CPA's services. Looking at
your company's financial big picture enables them to provide
strategic advice. Think of them as your chief financial officer
who can articulate the pros and cons of different financial
paths, such as securing a line of credit. And because they
speak the banker's language, accountants know what figures
and audited reports might be needed for various financial
services.
As businesses, repair stations have a lot in common,
but each of them has unique accounting requirements. An
accountant incorporates all of them, devising a program for
your business. This often includes a recommendation of
what accounting software program, with its various ledgers
and reports, will best meet your unique needs. As a shop
owner, you should be able to communicate and understand
basic accounting methods and concepts. For more indepth information on the topics presented below, Williams
recommended a number of websites, such as Score.org,
SBA.gov, and Entrepeneur.com.
Accounting Basics
There are two basic accounting methods.
Cash-basis accounting records expenses and books revenue
when money changes hands, either literally or virtually, when
the credit card payment shows up in your bank account. In tax
terms, if you install glass in a customer's airplane in December
2013, but the customer doesn't inspect, accept and pay for it
until January 2014, the earnings apply to the 2014 tax year.
Smaller businesses and many sole proprietors use cashbasis accounting because it's easier to do on their own.
This doesn't mean, however, that they don't have a full- or
part-time bookkeeper and an on-call accountant. One
downside is that cash-basis accounting does not
match expenses and revenues month-tomonth, because it does not recognize
them until money changes hands.
This makes it harder to
determine how much
it costs to open the
doors every day, and
to determine profit.
Going back to the glass
installation example,

THE BASICS ARE NOT THAT
COMPLICATED, AND THE
REPORTS IT MAKES POSSIBLE
PROVIDE THE INFORMATION
YOU NEED TO SUSTAIN YOUR
BUSINESS AND MAKE IT GROW.
the shop paid for the components, supplies and labor in
December, but its financial report will show no revenue to
cover this expense because the bookkeeper won't record it
until the customer pays the bill in January.
Accrual accounting records revenue when the business
completes the transaction, not when it gets paid. In the
cash-basis example, the shop would record the revenue in
December 2013, when it finished the contracted installation.
Expenses are handled in the same way, when they are
incurred, not when the bill is paid.
Following generally accepted accounting principles, most
incorporated businesses use the accrual method, especially
when they need audited financial statements for financing,
lines of credit and similar business transactions. It matches
expenses and revenue, giving the company a better idea how
much money it's spending to open the doors every day
and how much profit it's making.
Continued on following page

avionics news

november

2013

http://www.Score.org http://www.SBA.gov http://www.Entrepeneur.com

Avionics News November 2013

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