Small business bookkeeping is the process of tracking sales, purchases, cash flow, and expenses for any business, whether large or small. Bookkeeping makes it much easier to be accountable for your business' financial data. By accurately recording your daily income and expenses, you are able to have a clear picture of your company, where it should advance, and where the biggest opportunities for future growth are found.
In a small business bookkeeping process, you keep track of your company's expenses as well as its revenues. Small business bookkeepers will record income from sales, purchases, payroll, and accounts receivable. They will also record loans, accounts payable, income taxes, dividends, non-cash reserves, short-term and long-term investments, accumulated depreciation, and other financial statements.
For a small business bookkeeping process, there are two basic methods used to record your daily transactions. You may choose to keep track of accounts payable on a daily basis using a balance sheet, or on a regular basis using an account ledger. Both methods of recording an account payable date are used because it takes less time than recording an itemized deduction. If you use a balance sheet, each transaction is credited to an account and debited from that account. All revenues, expenses, and net earnings are recorded in your balance sheet. The difference between your gross revenue and your net profit, your gross expense and net income, and your gross debt and assets are your net account payable.
Small business bookkeepers record all of your employee expenses under the applicable category of that employee's paycheck. Your expenses include office supplies, benefits, and clothing as applicable. Office supplies typically include paper, ink, computers, any necessary software, office supplies, telephone services, and any necessary utilities, such as electricity. General expense accounts include entertainment, meals, health care, miscellaneous expenses, transportation, and telecommunications.
The second method for small business bookkeeping is to take an account of your accounts receivable and accounts payable. Your accounts receivable represents the sales that customers have made for goods that are still being stocked by your company. Your accounts payable represents the sales that customers have purchased from your company and for which payments have been made previously. Your bank reconciliation process involves comparing the sales and purchases of accounts receivable and accounts payable to determine what monthly income you are generating.
All of your small business bookkeeping transactions are recorded in cash, much like the cash register at your local grocery store. Everything is then transferred to your bank account in the form of a check or wire transfer. In essence, every transaction you make on your cashbook represents a purchase, an expense, or a payment. The bookkeeper then deducts his or her daily cash, net of any applicable tax, daily prophet, and his or her net amount of every sale, payment, or activity associated with his or her job.
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