The basic of accounting are of help to anyone who have started this new and very exciting business opportunity. Even if you started your business as small as you take it as hobby, count it a business and have accounting basics applied in it to stand more firm when still young. Separating your business account from the personal account will make things easier when we come to accounting. Separating the business part of finances from personal issues give it a chance to grow. It will be better to spend your personal in business matters for it counts to be more beneficial to you and your business.
Most of people don’t take themselves as accountants but in real sense they are accountants for they count the what their earn and do day to day financial calculation. As your business grows bigger, you may need to get a little more complex, but for now, you can keep your books on a simple excel spreadsheet, or one of the many accounting software packages out there.
Every business can be classified in to three primary groups. Every action you take creates an action in your books that are kept according to group. These groups are buying or purchasing records,Sales records and stock records. These categories can be compiled together in one page which we refer it as work sheet. These comprises assets that are in solid form and those in liquid forms, liabilities and full stock of business in net. Asset classification depend on the type of the item and how first it can be moved when it comes to sales. Liabilities are: the bills that you owe, any loans and credit cards for your business. Equity is what you make from your business and the savings that you have comprised from your business. Combination of liabilities with equity should add up to your full assets.
The total outcome of the business activities that makes up a specified profit margin at a specific time is what we refer as income statement. Income statement is best when prepared in the duration of one month to be convenience with all bill. That the supplies or products you sold cost you to purchase or manufacture. All related just to the sale of your product or service. Sales – Cost of Goods Sold – Direct Selling Expenses = Gross Profit. Net Income . The third financial form that you should prepare on a regular basis, at least weekly, is a cash flow statement. The the need for the record in business is to help in accounting and record update in tax payment and other expenses in comparison with previous records to eliminate any loss or false profit margin.