Taking Control Of Your Business With Accounting
Accounting is in every financial system of every business
. Putting simple checks to maintain balance within the business will go a long way for any entity be it a simple sole proprietorship or a more complex corporation. For your taxation needs, there are many accounting professionals whose specialty is just that who you can hire to look out for you your tax related concerns.
Doing your own accounting for your business can be great. Aside from keeping track of your expenses and savings, you have control over everything in your business. Imagine the time and money you can save by keeping your files and accounts in order.
If hiring an accountant is not yet an option for you, then it's time you started learning the rudiments of basic accounting to get things going for you. A simple accounting system is all it takes to make a big difference in terms of your control over your business.
The difficulty in using accounting is that first you have to be familiar with its vernacular. Thus, it entails some effort on your part to learn something new and unfamiliar. Accounting is basically known for its double entry accounting system wherein for every entry comes in pairs: debit and credit. For every value received (debit to assets), there is a value given up in exchange for that (credit to cash or liabilities).
To start a simple accounting of your business, you have to keep a book. This is called bookkeeping in accounting terms. It means you have to make a record of all your business transactions whether buying something for the shop, paying bills or selling appliances from the your store. Some use a ledger or a record book for this purpose.
Now that you've got your "book", its time to learn about the three basic elements for accounting:
1. Assets - these are things of value owned by your business. Examples are cash (from sales), accounts receivables, inventory, land, building, and equipment.
2. Liabilities - these are debts of your business to other people, businesses or financial institutions like banks or lending companies. The system recognizes these accounts with words followed by "payable" like accounts payable and loans payable. This also includes taxes and insurance payments.
3. Owner's Equity - this is the amount the business owner is entitled to receive of whatever is left of the assets after the liabilities have been taken. It is sometimes called net assets.
All three elements form the accounting equation:
Assets = Liabilities + Owner's equity
And since the equation must always be balanced, in the end of the books the amount of the assets should be equal to the owner's equity. If you cannot balance it, you must have missed something or your business assets are being funneled to the wrong account.
If this accounting work sounds too tedious for you, you can buy software that can do the record keeping of your business. Some offer the full accounting service in their programs, from trial balances to printing financial statements. However, you still have to manually type in the accounts on your computer. If you do have a basic knowledge of accounting, your program can still give you the wrong information.
Accounting is a necessary tool for any business. The more you understand about how it works, the better it can help you improve your business.
by: Jeff Jackson
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