1. After completing the annual bookkeeping for the first time for a small deli in Oceanside we notice they have $100 thousand in gross receipts, but their operating costs exceed their gross income resulting in a net loss of $20,000. The owners don’t understand because they offer great tasting, reasonably priced food products, a very nice place to come to, and have heard nothing but good things from their customers. After glancing over the income statement for the last year we notice they spent less than $500 on advertising and promotion. Therefore, we recommend that they consider spending more money on advertising because you can have the best product in the world, but without building a strong presence in the surrounding areas most people aren’t going to know you even exist.

2. An insurance broker calls us up and says he knows how to input transactions into his QuickBooks, but wants us to look it over before he has his S corporation tax returns prepared because he isn’t 100% clear on what is tax deductible and doesn’t know bookkeeping that well. We look over his income statement for the last calendar year and notice he has only $60 thousand in income, but has $22 thousand listed under automobile expense. We let him know having automobile expense that high definitely raises a red flag for audit purposes and ask him if he took out a personal use percentage. It turns out he did not so we figure out his personal use percentage was 25% and record an adjusting journal entry with a debit to shareholder distributions and a credit to automobile expense bringing it down to $16,500.