Never Ignore These 10 Bookkeeping Fundamentals

By | August 31, 2021

Millions of small company owners and startup entrepreneurs have mastered developing excellent products and services, forming successful teams, and gaining customers’ trust. Many of them, on the other hand, would very certainly fail basic accounting.

Measuring the success or failure of your efforts as a business owner will be meaningless if you don’t grasp the many sorts of “accounts” your bookkeeper employs to arrange your money.

Digital marketing skills, for example, aren’t adequate if you don’t have a clear financial picture of your company and run into cash flow issues.

You wouldn’t go to the doctor and request that only your legs be examined. You want a thorough examination! It’s the same with your company’s financial elements. It would help if you had to know everything about your company’s finances, not simply the balance in your bank account.

An effective virtual bookkeeping system saves time, as small-business writer Joshua Adamson-Pickett says. It not only helps you make outstanding judgments today and plans for your company down the road, but it also helps you make vital decisions in the future. It enables you to avoid fraud and prepares you for government audits.

For A Small Firm, There Are Ten Main Bookkeeping Fundamentals

Cash

It doesn’t get much simpler than this. All of your business transactions go via the Cash account, which is essential that bookkeepers frequently use two journals to document the activity: Cash Receipts and Cash Disbursements.

Accounts Payable (A/R)

If you sell items or services but don’t get paid right away, you have “receivables,” or money owed to you from consumers. Accounts Receivable must be tracked and kept up to date to deliver timely and correct bills or invoices.

Inventory

Unsold items must be adequately accounted for and tracked, much like money sitting on a shelf. Physical counts of inventory on hand should be used to test the figures in your records regularly.

Accounts Receivable

No one likes sending money out of the company, but having a clear picture of everything through Accounts Payable makes it a bit easier. Concise bookkeeping and accounting services ensure on-time payments and prevent you from paying someone twice! Early settlement of invoices may also qualify your company for discounts.

Payable Loans

This account would keep track of payments and due dates if you borrowed money to acquire equipment, automobiles, furniture, or other goods for your business.

Sales

All incoming revenue from what you sell is tracked in the Sales account. It’s essential to keep track of sales in a timely and precise manner if you want to know where your company stands.

Purchases

The Purchases Account keeps track of all raw materials and finished items you purchase for your company. It’s an essential part of figuring out your company’s “Cost of Goods Sold” (COGS), which you reduce from Sales to get your gross profit.

Expenses Associated With Payroll

Payroll costs might be the most expensive of all for many firms. Meeting tax and other government reporting obligations necessitates keeping this account correct and up to date. You’ll get yourself into much trouble if you try to avoid those obligations.

Ownership Interest

It is an excellent-sounding account. It keeps track of how much money an owner (or owners) invests into the company. Owners equity, also known as net assets, is the amount of money an owner possesses after obligations are deducted from assets.

Earnings Retained

The Retained Earnings account keeps track of any earnings reinvested in the firm rather than handed out to the owners. Retained earnings are cumulative, which means they provide a running total of money kept since its inception.

This account takes little effort to manage and is essential for investors and lenders who wish to follow the company’s performance over time.

Contact Virtual Bookkeeping pro services to get help in your Bookkeeping and accounting services. If you need help with your bookkeeping or accounting services in San Diego or want to operate your business more efficiently.

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