Accounting can actually be easier than most of us think if you start off on the right foot and learn the basic rules to follow. When you start your business you have to realize that what you will be doing is exactly what you had been doing as an employee, with the added asset that you have no boss to dictate your doings. You will of course be earning more but at the same time will have more at stake.Before starting off make sure you have the necessary points clear.
You must get acquainted with numbers and sums if you want to keep your own records.You need enough cash to start your venture with.
You need to put up a system to organize your cash entries and outflow.Accounting is probably one of the most important of any business and more so nowadays with the new programs available and new laws issued by the government.
The first step is to understand the various accounting terms and how they can work for your business. Go and check the complete list of accounting terms available on the accounting glossary terms. Once you are familiar with the terms you will be able to understand the relevance of each term and be able to communicate at ease and with more confidence amongst bankers and other colleagues.The next step will be to fit accounting in your daily business affairs. Every transaction you carry out must be recorded and entered in your firms accounting books. These entries must include deposits, checks, sales orders, cash receipts and purchase orders. Each of these entries may initially seem uninteresting, but they are fundamental for you to get an overall picture of your business for a more straightforward management.
Every separate entry you make will work like a puzzle piece that when put together will give you a clear overall view of your financial situation and the progress of your business. It is however important to place all your entries in their specific location and properly. Remember that your debits must always equal to your credits, so that for each transaction you will have a minimum two entries in your books, this is commonly known as a double entry.The accounting equation is also important, meaning that all assets equal liabilities plus capital. You will be dividing your accounting in categories and each of these will be in turn divided into accounts. The two common categories being Balance Sheet and Profit and Loss.
On the Balance Sheet you will be recording the assets, liabilities and capital, while on the Profit and Loss classification you will be recording the sales, cost of goods sold and expenses.
To ensure you get your accounting right follow this simple procedure and make a receipt for each transaction your business makes and always analyze each transaction to determine the type and the result it give. By doing so you will have a general view of how your business is going every time you need to.