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Many people look at accounting and say, “Accounting doesn’t make a lot of sense.” Well I hate to be bold but there is no better way to say, “Hey I’m a moron, I shouldn’t be running a business.” Accounting is the story of your business and you should know not only how to read that story but how to tell the story. There are a lot of complex accounting issues, they can be a nightmare. The chances are that you will never deal with them. Don’t worry about the complex stuff, focus on the larger aspec of accounting. You should be able to understand ninety-nine percent of all accounting issues with just a basic understanding of the principles and constraints. Read the rest of this entry »

Why is accounting so powerful? It is because it is all based off of one simple accounting equation:

Assets-Liabilities-Stockholder’s Equity = 0

Assets = Liabilities + Stockholder’s Equity

Stockholder’s Equity = Assets - Liabilities

Liabilities = Asset - Stockholder’s Equity Read the rest of this entry »

Understanding Financial Statements. The term financial statements refer to a complete set of statements that include an income statement, a balance sheet and a cash flow statement. The Income statement (sometimes also called the Profit and Loss statement or P & L accounts) reflects the profit performance of a business. This statement summarizes sales revenue and expenses and reports on the profit for a period. The foremost thing to understand is whether the business has made a profit or loss and if so how much? Profit or loss is also usually determined for a specific period whether it be a month, quarter, half year or year. Read the rest of this entry »

No matter what the size of your business, one truth remains: cash flow is king. It’s the lifeblood of your business. Yet, while most small business owners know this truth, many still struggle with basic cash flow definitions, fundamentals or management strategies that actually maximize benefits. In today’s uncertain economy, characterized by frequent market fluctuations and ever rising interest rates, many small businesses with limited financial knowledge are struggling to stay alive, let alone thrive. So why is poor cash flow management such a large killer of small businesses? Here are the two main reasons: Read the rest of this entry »

Bookkeeping is an essential skill which must be mastered before running a business of your own.  It is not only important for tax returns and calculating the overall tax liability of your business each year, but it is also imperative for cash flow analysis and financial forecasting.

You can employ an accountant to do the job for you, although this is going to be an expensive choice.  It is clearly far better to take the time to master the basics of bookkeeping, largely the double-entry system, to avoid this hassle and expense, and to give you the value of accounting information to expand and consolidate your organization. Read the rest of this entry »

What is the main feature of a successful business? It brings in a steady flow of revenue. Without a steady flow of money your business will stall and ultimately sink into debt and hard times as you live from payment to payment. However, learning to manage the receivables is not too difficult. All that it requires is a little patience and some amount of effort.

What are receivables? They are the bills that are sent out to debtors. This expected payment from customers and clients will be the bread and butter of your business as you will most likely rely on the proper payment of bills to finance any expansion plans or just to pay the plethora of bills that you will face. Thus, managing your receivables efficiently is of crucial importance. Read the rest of this entry »

Businesses generally make extensive use of spreadsheets both in accounting and all other business fields. Being a numerically based system of analyzing information spreadsheets are used throughout every accounting function as the technique presents an ideal basis to maintain accuracy and automate the collection of financial information.

Every small business needs to keep records of sales invoices and income received and purchase invoices in respect of expenses. It is not sufficient for accounting and taxation purposes for these receipts and payments to be left in the office or the back of a van in a carrier bag.  At some stage these prime bookkeeping documents need to be processed. Read the rest of this entry »

Double entry bookkeeping is an accounting technique to record the financial transactions of a business where every transaction is entered twice, equal and opposite transactions. Double entry is required for all businesses that must produce both a profit and loss account and a balance sheet.

All limited companies are required to produce a statement of assets and liabilities and maintain a system of financial control and invariably need to adopt a system of double entry bookkeeping usually using an accounting software package. Read the rest of this entry »

Double entry bookkeeping stretches back centuries perhaps even as early as the 12th century and is now accepted worldwide as the accounting standard to be employed by all companies in recording the financial accounting records. The first written explanation of the accounting system was reportedly by a Venetian mathematician Luca Pacioli towards the end of the 15th century. Read the rest of this entry »

Did you know that around 50% of small business owners don’t use saccounting software to process their accounting information?  Many resort to the excel spreadsheet to keep track of money coming in and money going out.  These small business owners would rather get on with their core business than worry about the administration tasks associated with accounting, even with a software package, because it seems like such a waste of time. Read the rest of this entry »