Small Business Accounting Basics

Accounting or accountancy is basically the scientific measurement, interpretation, and communication of financial information about non-financial financial entities like corporations and companies. This includes the recording of decision points, events, transactions, information, and transactions regarding a specific company, entities, individuals, and other related subjects. Accounting is often used to represent the difference between what is termed income and what is termed expense. It also attempts to capture all forms of financial risk.

The basic method of accounting is that of the recording of financial data in documents called journals and ledgers. In actuality, accounting records are nothing more than organized notes and statements of events by individuals or institutions on an ongoing basis. These records are made up of information gathered over a period of time with specific reference to the financial activities of the entity being recorded. The method of recording this financial information typically includes the use of ledgers, books, or computerized data tracking systems. All of these methods are designed to effectively capture the financial transactions and information needed for the preparation of accounting reports and to make the day to day management of the entity more effective.

There are two basic components that form the essential core components of accounting; namely, income statement and balance sheet. The income statement presents the financial results of the business entity during a specific period of time, and it presents all sources of income other than the operating revenue or assets of the business entity. The balance sheet, on the other hand, presents the balances of all of the financial transactions and obligations of the entity as of a particular date.

Cost accounting is a relatively newer branch of accounting, which is focused on the measurement of value based on direct and indirect expenses of the business. Cost accounting uses numerous techniques to measure the costs of doing business and these include the cost of goods sold, sales, value of assets, cost of services or inventory, cost of facility, and operating overhead. Business entities are required to annually submit a statement called the statement of account which provides a description of their assets, liabilities, ownership equity, and net worth. A key objective of cost accounting is to improve the management of the enterprise by providing information that enables managers to make strategic decisions about resource allocation. In cost accounting, there is emphasis on maintaining adequate levels of total inventory, fixed assets, and total production, while allocating resources to meet increasing operating costs and other unexpected factors.

A bookkeeping service is a service that provides assistance in the preparation of financial statements and in the auditing of the accounting records of a business. The scope of the services offered by bookkeepers includes the preparation of balance sheets, income statements, quarterly statements, creditor reports, handbooks, manuals, agreements, tax reports, and more. They assist small businesses in getting loans, buying property, paying wages, and taking other decisions that have an effect on the day-to-day activities of the business. The scope of services provided by bookkeepers varies widely, depending on their experience and the resources they have on hand. The number of employees they hire also affects their scope of work.

Outsourcing accounting and bookkeeping services can be advantageous for small businesses that cannot afford to have an in-house accountant or a full-time in-house bookkeeper. It saves money in terms of payroll taxes, employee wages, training expenses, etc. The accounting and bookkeeping services provided by the outsourced accountant and bookkeeper are highly professional, accurate, timely, and accurate. The small business can achieve greater flexibility in data collection because the outsourced accountant and bookkeeper can access financial information via computerized systems that are accessible 24 hours a day.


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Accounting and Taxation

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