The essential part of running a business is recording and managing all the organization’s financial transactions. Some companies use business accounting software to collect these data for analysis, evaluation, and interpretation—a reflection of how a company is doing in the process.
However, staying on the top of finance keeping can be very challenging for small entrepreneurs, especially if the workforce in the accounting section has little or outdated knowledge in bookkeeping and accounting—for this reason, invoice maker software was created to keep bookkeeping easier. We’ve listed ways on how to have a basic understanding of how small business bookkeeping works.
Understand and Set Up Your Business Accounts
Create and maintain a record of debit and credit entries in particular transaction types. Mainly categorize it into five basic types: assets, liabilities, revenue, expenses, and equity.
Determine the Type of Bookkeeping to Use
Small business owners can choose two business keeping systems. The first one is the cash system that depends on the cash flow wherein transactions are recorded when cash changes hands or the accrual system recorded as purchases, used mainly by bigger businesses.
Decide on a Bookkeeping Method
After deciding about the bookkeeping type, the next decision to make is to choose. Two recording methods: a single-entry (like keeping a check register) or double-entry (two entries are made for each transaction—one for debit and another for each transaction credit—for balancing purposes) bookkeeping.
Keeping Your Financial Records Organized
When financial transactions are correctly recorded in the appropriate accounts, the next thing is to make sure that the records are well organized or audited. By this, it becomes easy to determine which expenses are qualified for deductions; in-store, two copies should always be kept—a hard copy and a backup copy through cloud storages.
Learn more through this infographic by Kippin.