Small businesses can be defined as privately-owned organizations. Small Business Accounting is a deciding factor about how the business will grow. They can also be considered as sole proprietorship organizations. Small business organizations have a smaller number of employees. These organizations enjoy special privileges from the government. These organizations also have some privileges in taxes. In some states and countries, there are different tax provisions.
Few examples of small accounting:
- Continent stores
- Small groceries
Steps involved in small business accounting:
- Open a separate bank account: it is important to a business account separate from a personal bank account. It will be a deciding factor that how much organized your revenues is.
- Record all cash flow: A strong foundation of business is laid only on how organized your account is. As strictly you will observe your transactions the more organized your finances will be. You can also install a bookkeeping system.
- Selecting the proper accounting method: you have to decide on a proper method of accounting before the installation of the bookkeeping system.
There are two main methods to keep track of transactions:
Cash: in this system, you can keep a record of income and expense when any credit or debt activity goes on into your account.
Accrual basis: in this method you use double-entry. By double-entry you have to enter the transaction details for income and expense once the transaction is done.
- Transaction to trial balance: A trial balance sheet is prepared by posting the past balanced entries on the journal list that is entered into the general ledger.
- Create and adjust trial balance: adjustments are made on the trial balance sheet to confirm all the debits and credits.
- Generation of financial statement: once the trial balance sheet is balanced you can generate the financial statement of the business.
- Closing your book: the last step involves the closing of the account. The closing of the account is important as it resets all the balances to zero.
Small businesses can also be defined on basis of size, revenues generated, and regularity authorization.
Small business accounting includes the process of analyzing finances, transactions made, tracking, and recording the cash flow. Accounting is a major factor to run your business properly so you should always keep your account updated. Always have track of accounts. An important point to be kept in mind is to avoid lots of paperwork. It is difficult to manage piles of paperwork and also creates problematic situations.
Small business accounting tracks the cash flow of your business account.