Accounting for Small Business
An account is the name given to the statements where business transactions in monetary terms are recorded. This recording is one of the basic and essential acts in order to operate a successful venture. As an entrepreneur you should know some basic accounting treatments and able to go through and understand profit and loss, balance sheet and cash flow statements.
There are basically two methods of accounting which can be applied. They are accrual and cash basis. Accrual is widely accepted and mostly used as it provides a better picture of the business in terms of profit and loss. Cash system focuses on transactions only when money is transferred, this can give a window dressed accounting picture as in the practical world today transactions take place on credit also which can be ignored in this system.
When starting a business, it is important to keep accurate track of all the transactions. If you are not an eligible accountant or have adequate knowledge regarding the entries, you should hire a bookkeeper. A bookkeeper as the name suggests is the person who will record transactions as per the accounting standards and laws along with making financial statements.
This record keeping will give you a fair idea regarding your business. The profit, loss, creditor and debtors which are due along with providing a picture about your assets, expenses, incomes and liabilities will help you in making better decisions. It will also give you a reasonable idea regarding where as an entrepreneur you and your business stand and what areas to focus on in order to succeed.
With changing time, manual accounts have given way to computerized software and accounting systems. As entrepreneur this is even great as this further reduces the chances of human error and fraud. It also helps with making prompt decisions as a computerized system gives immediate ratios and other individual account details. It can even easily take in any expansion and increase in work load, assisting in all issues and works.
Up to date accounts also help in making the most accurate calculations while making tax payments and other such regulatory payments. It also increases the goodwill of the company as both debtors and creditors like to deal with people who fair play.
At times due to any issue receipts and invoices must be checked or presented as evidence. A good accounting system in such a case tends to be the only savior. As double entry provides full proof regarding every entry made. Checking on and finding the detail also becomes an easier task. This also reduces chances of human error and any potential fraud by any party involved.
Managing accounts using the right system and software and a qualified person shall help in the growth of a business. It makes an entity look smart and professional ready to face the challenges of the market and stand with firm footings in the corporate world. So, mange your accounts and take the first step towards success!