Using Accounting to Manage Personal Matters

Anyone who has ever used money whether to spend or save it has already applied the principles of accounting without knowing it. Accounting can be applied to daily tasks of allotting your allowance for food and transportation. It may even concern paying bills especially credit card charges. You may not even realize it but you have actually used it in managing your checking or savings account. It doesn't take a genius for one to apply accounting in managing personal matters such as food, transportation, buying clothes online, and other activities that require the use of money.

Checking Accounts

It is important to balance your checking account in a periodical manner to explain any differences between the entries in your bank statement and receipts or records of transactions that you kept. This ensures that the bank is making the correct changes in the account statement every time there's a transaction, whether you're withdrawing or depositing money. Some people do this every month whenever they receive their account statement. However, fewer people are able to do this due to the popularity of internet banking wherein you can check your account and transactions daily.

Balancing your checkbook may require you to take note of any charges in the account statement that were not yet recorded in the checkbook. These charges may include special transaction fees, ATM fees, low balance fees and overdraft fees. Low balance fees are usually charged when there's a required minimum amount of cash in your checking account. In addition, you may balance your checkbooks to record credits that were not included in the previous recording of transaction. Examples of these credits are refunds, automatic deposits and other electronic deposits. You may also want to record the interest your account has earned if your checking account bears interest. The most important thing in balancing your checkbook is verifying if either you or the bank has made any errors in record-keeping.

Income Tax Returns

One of the most dreaded personal accounting is the filing of the annual income tax returns. People who are having trouble doing their income tax returns hire CPAs or Certified Public Accountants to file it for them. Others try to do it on their own since hiring a CPA can contribute to additional costs. It's important to file the annual federal income tax returns since failing to do so would mean you evaded your tax-paying responsibilities. Some terms in the forms may include unfamiliar terms and these are included but not limited to the following:

Income means any money earned from working and owning assets. Unless there's a specified statement of exemptions from income tax, you will not need to pay for that.

The amount of income exempted from income tax is called personal exemptions.

Standard deduction means that some personal expenses or business expenditures can be subtracted from the income reducing the total taxable income amount. Included in standard deduction are expenses like charitable contributions, property taxes and interests paid for mortgage.

The last term is taxable income or the balance of income subjected to taxes after all standard deductions and personal exemptions are factored out.