Accounting for Government Contracts - Fringe, Overhead and G&A

If you are planning to have the U.S. Government as a client, you will need to have your accounting systems set up so you can handle their accounting requirements. Regardless of whether you are engaging in a plain vanilla contract or an SBIR grant, you will be required to negotiate fringe benefit rates, overhead rates, and general and administrative rates.

Fringe benefits rates include

Compensated Absences, such as Vacation, Holidays, and Sick Leave; Medical Programs, such as Health and Dental Insurance; Retirement, such as the Defined Contribution Portion of your Retirement Plan and Plan Service Fees; Long-term Disability Coverage; Worker's Compensation Coverage; and Employee Wellness, such as Fitness Club Membership and Other Wellness Programs

Accounting for Government Contracts - Fringe, Overhead and G&A

Overhead covers direct and indirect support of the employees whose time is being billed to the Government. This includes items like

Rent (only for the space that those employees use); Depreciation of their furniture and equipment; Utilities (based on the space allotment for those employees); and Supplies that these employees share, such as office supplies.

General and administration covers other costs that are necessary for the company to perform in this contract, including:

Management (and their associated fringe, direct, and indirect costs) Legal costs State and Federal taxes Marketing to the Government costs Accounting

Note, however, that they have extensive regulations covering was is not considered an allowable cost (see the FAR section 31.205 - Selected Costs [http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/31.htm#P268_51249] to get a specific description as to what is allowable and what is not.

Once you have negotiated these rates, you will be required to back them up yearly using an indirect cost model to show that you are matching your negotiated rates. This model is subject to audit.

Although you can figure out what needs to go into these calculations, it will take a long time to read all the regulations. If you believe that you want to win Government contracts, you must think ahead or hire a consultant to assist you with the process.

Accounting for Government Contracts - Fringe, Overhead and G&A
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Ms. Worrall is the President of Worrall Consulting, LLC. Worrall Consulting is a finance and business strategy consultancy providing professional services to high growth, early stage companies. The company provides capital formation assistance, market research and business intelligence, and business planning strategy. More information about the company can be found at http://www.worrallconsulting.com - Additional financial and strategy advice can be found at http://www.cfoyourself.com

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Should I Get an Accounting Degree? Pros and Cons

The Pros:

You are almost guaranteed to find a job somewhere as there is always a need for accountants. Especially with the clamping down on financial legislation, professional management reports and annual financial statements need to be submitted in order to stay in business, so in house accountants are always on board, if not the people with accounting degrees are outsourced. Unless you work for yourself, you will more than likely be offered work within a large firm allowing you to interact with many like minded people on a day to day basis. Your degree can be utilized within many fields of accounting, adding diversity and growth to your qualifications. Through the use of your studies, you can become exposed to many different types of business when you do their books or their tax. Whatever work you do for clients will be an education in the operating of their business. Impressive salaries and opportunity for growth with any of these degrees.

  The Cons

Should I Get an Accounting Degree? Pros and Cons

Although there is a lot of job availability within this field, so too are there a lot of accounting degree graduates. You will be up against some tough competition for entry level jobs. Using your accounting degree to go and work within a big firm, you will usually be assigned to many different operations for many different businesses. This means you will be answering to a number of different "bosses" which can be stressful and require a lot of management on your part. On the whole, the accounting world is relatively conservative. But perhaps that will suit you? Your work is generally billed per hour which means you need to stay on top of every single hour that has been worked. All work needs to be documented, so an extensive record of hours worked and to be billed needs to be kept. All graduates will soon find out that you will be required to work long hours. Sometimes all night or all weekend if it means that the job gets done on time. That impressive salary does have it's hitches!

All in all, opting to study for an accounting degree is a positive choice that will offer you many rewards in the long run. But maybe after perusing these few pros and cons, you will feel differently about this.

Should I Get an Accounting Degree? Pros and Cons
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Chart of Accounts for a Service Business - Accounting

A well-designed chart of accounts for a service business limited liability corporation, or LLC, allows for easy reporting and income tax preparation. The chart of accounts is a catalog of all accounts to be used by a business during the year. It's organized to provide a centralized place to accumulate financial information. The accounts are generally identified by numbers and a brief description, such as 1010 Cash - Bank of America, 2010 Accounts Payable and 5020 Insurance Expense.

Verify what reports you need.

A proper chart of accounts for a business service LLC should provide information for reporting internally and to external parties. You first identify what you need for tax returns and then set up the chart of accounts around this need. Then, check out other government reports, such as sales tax or equipment reports and be sure the chart of accounts can help you in these processes. If management or investors need a specific financial report, be sure that the accounts setup in the chart can be compiled to create such a report. You may need to separate sales by type or to provide more granular information, such as sales by locations, or sales by type and you will need to create separate accounts to accumulate data in this fashion.

Chart of Accounts for a Service Business - Accounting

Assets, liabilities and equity accounts

Set up balance sheet accounts in your chart of accounts, such as assets, liabilities and retained earnings. Identify ranges for assets, such as from 1000 to 1999. Liabilities could run from 2000 to 2999 and retained earnings would run within the 3000 to 3999 range. As you create accounts, use these ranges to keep the accounts straight. Within the assets, you should have at least one cash account, which could be a 1001 Cash - Bank Alliance. Don't set up a liability account using the range for assets, or you will end up with a mess. If you're not clear about what accounts to create, search for a balance sheet template online to get ideas.You can also review your tax return for balance sheet accounts.

Income and expense accounts

Create income statement accounts in your chart of accounts. These are revenues and expenses related to the service business. You decide on an account range for your revenues, such as 4000 to 4999 and set up these accounts within this range. For example, a service revenue account would be 4001 Consulting Revenue account. Expenses would have a range of 5000 to 7999 and are created to track expenses separately. For example, if you pay for rent, office supplies and insurance, these transactions are recognized in three different accounts, such as 5010 Rent Expense, 5003 Office Supplies Expense and 5010 Insurance Expense. Don't use the same account number on more than one account. If you'd like to know what accounts belong to the income statement, take a look at your own business tax return or at the Internal Revenue Service Form C, filed with a 1040.

Note that commas are not used with account numbers.

Creating a chart of accounts can be a challenge, but doing it on a systematically way will help you get the results you need. You could test your chart of accounts by running reports and making sure information is placed in the right spots. You could also have an accounting professional review your chart of accounts before you start using it.

Chart of Accounts for a Service Business - Accounting
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Sheila Shanker CPA, MBA is based in Southern California, a consultant with over fifteen years of solid experience in many industries, including nonprofit organizations. Her book, "Guide to Non-profits" has received GREAT reviews at Amazon.com. She writes online self study CPE courses and her articles have been published online and in national magazines, such as "Journal of Accountancy", "Veterinary Economics", "Architecture Business and Economics", and "Teachers of Vision". You can contact her at her website www.webshanker.com

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