Keeping Track of Transactions – What Counts as a Transaction A business transaction takes place when an event that can be measured in terms of money has occurred. There are dozens, probably hundreds, of events that happen in any business on any given day that have no monetary effect: opening the mail, talking on the … Read more
The Basic Accounts – Debits and Credits One of the most basic—and most confusing—concepts of accounting is debits and credits. That is usually one of the first things taught, and one of the later things that clicks, in basic accounting courses. The debit-credit scheme, though, is at the bottom of every accounting system. Once you … Read more
The Basic Accounts – How the Accounts Connect At some point, every type of account will interconnect with each of the others. Assets will be used to pay for expenses. Inventory products bought on account involve both assets and liabilities. Product sales hit both cost and revenue accounts. Owner withdrawals deplete both assets and equity. … Read more
The Basic Accounts – Revenues, Costs, and Expenses New and small-business owners tend to track their profit-related accounts more than any others. There’s a good reason for this: Without pretty consistent profits, no business can survive for the long haul. There are three numbers that go into figuring out profits: revenues, costs, and expenses. Every … Read more
The Basic Accounts – All about Equity Equity represents how much of your company is really yours and not owed to someone else. Think of it in terms of your house: You own your house, but the bank probably has a claim on part of it, too, in the form of your mort- gage. Here … Read more
The Basic Accounts – A Look at Liabilities Every dime your business owes, no matter to whom or for what reason, is a liability. Owing someone a product (such as a magazine subscription) or a service (such as insurance coverage) counts as a liability as well. Although there aren’t as many kinds of liabilities as … Read more
The Basic Accounts – Understanding Assets Assets are those things that your business owns, from the cash in your desk drawer to the file cabinet in the backroom to the delivery van in the drive- way. It does not matter whether they are big or small; all that matters is that your company owns them … Read more
The Basic Accounts – Accounting Starts with Accounts As you might expect, an accounting system is made up of accounts. Here accounts really serve as a way to group information, much like a filing system. For example, everything that happens with cash gets run through a cash account, and those ten receipts for stamps will … Read more
Accounting Is More Than Numbers – Pick the Right Accounting Professional Once you decide you want some help, your next step is to figure out what level of help you’re looking for. Doing that will point you toward the right kind of professional. You may use a mix of professionals—for example, a bookkeeper may handle … Read more
Accounting Is More Than Numbers – How Accountants Can Help You When you are just starting out in business, having a professional accountant on your team can make your life as an entrepreneur a lot simpler. Without a background in business accounting or finance, it’s easy to get the numbers wrong, or sometimes even overlook … Read more
