If you are a business owner, keeping up with your books can be more than just time-consuming. Out of ten businesses, seven are doing well but doing almost everything wrong in managing their books.
Keeping your business records organized and up to date is not an easy task, but it’s also not a difficult one either. Once you get the hang of it, you’ll notice how easy it becomes to complete your business bookkeeping tasks.
So, let’s start with a reminder,
What is Bookkeeping?
Bookkeeping is the process of recording daily financial transactions of business, so it can be used for creating reports on income & expenditure. For any company with a long-term plan to survive, keeping records is necessary.
Keeping your books in order can help you make better business decisions. The numbers are there for all to see, and your business will be a lot more profitable because of it.
Here are ten business bookkeeping basics every business owner should know.
Accounts Receivable
Accounts receivable is an asset that accounts for monies owed to a company from its customers. For example, if a customer owes your business $5,000, you can record that as an account receivable on your balance sheet.
Accounts Payable
Accounts payable is an account that represents monies owed to suppliers, employees, or tax authorities. For example, the company owes a phone bill of $3,500; you can record that as accounts payable on your balance sheet.
Cash
Cash is an asset that typically includes both physical currency and checks. Cash can be damaging if your business owes money, either to the bank or tax authorities, via unpaid taxes.
Inventory
Inventory represents the value of goods that a company purchases or makes for resale later in time. In other words, inventory is goods that you own and can use in the future to generate income.
Owners Equity
Owners equity represents the value of your business after subtracting liabilities. It comes out to what you own minus what you owe, so it’s much like what you would sell the company for.
Purchases
Purchases are expenses incurred during the course of business for inventory, salaries, rent, etc. They are recorded in the period when they are incurred.
Sales
Sales is revenue or income generated by the business. After expenses are taken out and shown on your income statement or P&L, it would be the income.
Retained Earnings
Retained earnings are the business’s accumulated net income or loss, which is distributed to shareholders. The net income earned by a company belongs to the corporation’s shareholders.
Loans Payable
Loans payable are monies your business owes to a bank or person. For example, the company owes the bank $10,000 this month, which is recorded in the business records.
Payroll Expenses
Payroll expenses are salaries, benefits, and bonuses that a business pays its employees. For example, the company pays $6,000 in payroll, recorded in the business records.
Conclusion
Those are the top 10 bookkeeping tips you need to know. You can do your bookkeeping and make better business decisions with these accounting basics. Most of all, you show your clients that you are professional and know what you are doing.
Looking for an experienced bookkeeper in Suprise, Arizona? Contact us today.