Setting Up a System – Get (and Stay) Organized By now you have probably realized that accounting involves dozens of forms, hundreds of other pieces of paper, and thousands upon thousands of numbers. Keeping track of all of that information can be tricky. Having a system in place that tells you how to fill out … Read more
Keeping Track of Transactions – The Accounting Cycle You now know about the bulk of what goes into the accounting cycle (the process that starts with a transaction and ends with financial statements). In fact, the entire accounting cycle can be summed up in eight basic steps. Write up transactions in the daily journals. Post … Read more
Keeping Track of Transactions – Checking It Twice With all those numbers floating around, mistakes are inevitable. One way to catch mistakes (though this is by no means foolproof) is to prepare a report called a trial balance. A trial balance is basically a listing of every account and its balance, with debit balances on … Read more
Keeping Track of Transactions – The Daily Journals When accounting was strictly a pencil-and-paper gig, journals were books containing pages and pages of transactions. Because that was the place where all transactions were first recorded, journals are called the books of original entry. Now, most journal work is done using a computer, making the old … Read more
Keeping Track of Transactions – Meet the General Ledger The general ledger is like a file cabinet for all your accounts. Each account gets its own page, and every entry that affects that account is recorded there. In that way, the general ledger acts as a summary of your journals, which are books where all … Read more
Keeping Track of Transactions – Setting Up Your Accounts Every accounting system needs accounts, and every account will fit into one of the standard account categories (such as assets or revenues). When you start out in business, it can be difficult to anticipate every single account you are ever going to need. Instead of trying … Read more
Keeping Track of Transactions – When to Record Transactions In accounting, as in most other things, timing is everything. That applies to transactions themselves, in two different ways. The first involves the day the transaction actually took place (for example, you buy a box of copy paper and tell the store to bill your company). … 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
