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Each year, thousands of small businesses fail because their owners have lost control of their finances. Many of these failures are brought on by the inability of the busi­ness owners to understand the complex accounting processes and systems that have become relatively standard in modern business. Accounting and bookkeeping have, in most businesses, been removed [...]

The purpose of any business financial recordkeeping system is to provide a clear vi¬sion of the relative health of the business, both on a day-to-day basis and periodically. Business owners themselves need to know whether they are making a profit, why they are making a profit, which parts of the business are profitable, and which [...]

The purpose of the balance sheet is to look at what the business owns and owes on a specific date. By seeing what a business owns and owes, anyone looking at a balance sheet can tell the relative financial position of the business at that point in time. If the business owns more than it [...]

The other main business report is the profit and loss statement. This report is a sum¬mary of the income and expenses of the business during a certain period. Profit and loss statements are sometimes referred to as income statements or operating statements. You may choose to prepare a profit and loss statement monthly, quarterly, or [...]

There are a few more items that must be understood regarding financial recordkeeping. First is the method for recording the records. There are two basic methods for measur­ing transactions: the cash method and the accrual method.

The financial recordkeeping system that you will set up using this book is designed to be adaptable to any type of business. Whether your business is a service business, a manufacturing business, a retail business, a wholesale distributorship, or a combi­nation of any of these, you will be able to easily adapt this simplified system [...]

These are accounts that are used to track the various sources of your company’s income. There may be only a few sources of income for your business or you may wish to track your income in more detail. The information which you collect in your income accounts will be used to prepare your Profit and [...]

These are the accounts that you will use to keep track of your expenses. Each separate category of expense should have its own account. Many of the types of accounts are dictated by the types of expenses which should be itemized for tax purposes. You will generally have separate accounts for advertising costs, utility expenses, [...]

Asset and liability accounts are collectively referred to as Balance Sheet Chart of Accounts. This is because the information collected on them is used to prepare your business Balance Sheets. You will set up current and fixed asset accounts and current and long-term liability accounts. Types of current asset accounts are cash, short-term notes receivable, [...]

One of the most difficult and complex accounting functions that small businesses face is their payroll. Because of the various state and Federal taxes that must be applied and the myriad government forms that must be prepared, the handling of a business payroll often causes accounting nightmares. Even if there is only one employee, there [...]