It’s an onerous task. It’s mundane. It’s complex. It’s just plain ole hard.
But as a business owner, it’s one that’s absolutely crucial to the growth and successful operations of your company.
What is this unfortunate-yet-critical task? Simple: accounting.
Keeping the books is no doubt hugely important to a business owner so that he or she has a good grasp of the company’s financial status. But there’s also no denying that complex accounting principles aren’t most folks’ cup of tea.
In this article, we’re going to help you learn some of the small business accounting basics that you’ll need to keep tabs on your company financially. With this knowledge absorbed, knocking “bookkeeping” off your checklist of to-dos will be just that much easier.
Create Journal Entries
A journal entry is the record of a transaction. Whether a debit or a credit, a journal entry tells you the story of why money entered or left your business bank account.
It’s absolutely crucial that you record every incoming and outgoing transaction as a journal entry in a consolidated location. This will allow you to keep track of money. When business operations start growing and transactions become more complex, the simple truth is that you’re not going to be able to keep track of everything without this granular system.
Use a General Ledger
The next thing to keep in mind when you’re doing the basic accounting for small business operations is that you should keep a general ledger. This is the consolidated place where all your journal entries will live.
The general ledger will also tie into your bank account to give you a running total of your bank balance.
There are a lot of general ledger options available in the market, and you can’t go wrong with many of them. Be sure to pick a software option that has plenty of positive reviews from happy entrepreneurs like yourself, like Quickbooks.
Some of these software options will require some additional work in a basic accounting course for small business operations so that you’re able to use the platform effectively. Click to learn more about the Quickbooks certification.
Reconcile Bank Statements
Once you have your journal entries set up in your general ledger, it’s time for you to reconcile bank statements to your general ledger every month. The act of reconciling bank statements is essentially ensuring that the numbers in your ledger match the ones in your bank.
Create the Three Financial Statements
The last task is to use the information from the reconciled bank statements and categorized transactions in the general ledger to create the three financial statements: the income statement, the balance sheet, and the cash flow statement. These three pictures provide a holistic view of your company’s operations as well as its current financial status.
Small Business Accounting Basics You Should Know
There you have it. With this guide to small business accounting basics under your belt, you should be far better equipped to do the books for your company.
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