Shirking those responsibilities will put you in serious hot water. Keeping this account accurate and up to date is essential for meeting tax and other government reporting requirements. Payroll Expenses. For many businesses, payroll expenses can be the biggest cost of all.It’s a key component of calculating “Cost of Goods Sold” (COGS), which you subtract from Sales to find your company’s gross profit. Purchases. The Purchases Account tracks any raw materials or finished goods that you buy for your business.Recording sales in a timely and accurate manner is critical to knowing where your business stands. The Sales account tracks all incoming revenue from what you sell. If you’ve borrowed money to buy equipment, vehicles, furniture, or other items for your business, this account tracks payments and due dates. Concise bookkeeping helps assure timely payments and avoid paying someone twice! Paying bills early can also qualify your business for discounts. No one likes to send money out of the business, but a clear view of everything via your Accounts Payable makes it a little less painful. The numbers in your books should be periodically tested by doing physical counts of inventory on hand. Unsold products are like money sitting on a shelf and must be carefully accounted for and tracked. ![]() You must track Accounts Receivable and keep it up to date so that you send timely and accurate bills or invoices. If your company sells products or services and doesn’t collect payment immediately, you have “receivables,” or money due from customers. All your business transactions pass through the Cash account, which is so important that often bookkeepers actually use two journals, Cash Receipts, and Cash Disbursements, to track the activity. Here are 10 basic types of bookkeeping accounts for a small business: Notably, it prepares you for government audits and helps prevent fraud. As small-business writer Joshua Adamson-Pickett explains, it not only helps you make solid decisions now and plans for your company down the road, an efficient bookkeeping system saves time. ![]() You need to know everything about your business’s finances, not just your bank account balance. ![]() You want a comprehensive exam! It’s the same with the financial aspects of your business. You wouldn’t go to the doctor and ask to only have your legs checked. As the business owner, if you don’t understand the different types of “accounts” your bookkeeper uses to organize your finances, measuring the success (or failure) of your efforts will be futile.īeing adept at digital marketing, for example, isn’t enough if you don’t have a clear financial picture of your business and run headlong into cash flow problems. Many of them, however, would probably flunk basic bookkeeping. Millions of small business owners and startup entrepreneurs are masters at creating great products and services, building effective teams, and winning over customers.
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