Accounting and Basics Terms for Beginners
Business seems to be a simple thing till you come to know about some of its surprising and complicated things. For some it may be a simple selling of goods and that number should always be greater than what goods you are creating. Is it right? Wrong.. If you are not keeping everything in record, your company will take a sudden dip and will go towards bankruptcy one day.
So, this accounting thing is pretty essential and it is the most important tool any business would require for its success. Its one thing that will take all financial decisions for departments like increasing production, determining salary amounts, equipment and supplies, purchasing vehicles, accounting is a critical component that can make any business successful. So, if you are not sound with accounting, it should be well thought of and that’s why we will be discussing today.
Choose an accounting method that works for you.
There are two types of accounting methods, one is cash accounting and other one is accrual accounting. Cash accounting is basically done for small businesses. It based on records in real time and when a transaction is done, you will write it down or record the transaction.
Large corporation use accrual accounting, which is basically logging each transactions based on actual or non-actual payment transaction. This method is used to record revenue accounting and both of these methods can also be used in tandem. When filing tax return you may have to choose one of the above methods for accounting.
Learn basic accounting terms
There are several terms in accounting and the most basic ones we use are :
Credit, Liability, Revenue, Expenses, Depreciation, Account Receivable, Overhead, Transactions, Debits, Assets, Equity, Cost of sales, Cash Flow, accounts payable, net profit/loss and redeemable assets. All of these terms need your attention and I recommend you to read about them and know the definitions on Wikipedia and Dictionaries.
Accounting Tools and Using them efficiently
General ledger is a pretty basic thing and you need to know how to use it, all the accounts will be maintained by it. Journals is another important thing to learn. Each account entries will be recorded in the account ledgers and the balance sheet will record your equity, liabilities and assets. Recording of revenue, cost of goods and any expenses will give you a track of cash flow and hence it controls all kind of negative cash flows. If you learn to use these tools then you will be benefitted at large and your company becomes more successful in time to come.
Some basic accounting principles
Revenue of a company never tells the clear picture, if you subtract the liabilities from asset that will determine the equity of your company, this simple rule should be remembered while updating, balancing accounts.
Proper accounting in each part of business by keeping all kind of transactions like receipts and logging will help ensure proper growth. Always keep an appointed person who analyze all the transactions and determine the type of transaction, debit or credit to individual personal accounts and other accounts involved. Make sure all credits equals to all the debits and adding subtracting and all financials are properly documented in balance sheet and income statements.
People new to accounting should take a small or available course of proper methods of accounting, by learning new and updated rules and methods you can save a lot at the time to taxing tax. And I recommend to buy best accounting software that can reduce your workload by doing this more appropriately.
Software can not only reduce workload by many inventory keeping and managing stuff that you can keep track of. Some of the software in accounting field will also teach you, how to do things easily with start lessons called primers.
So, if you are big or small, a startup or a professional keeping proper records of transactions and will give you lots of benefits and this is what a beginner accountant will do. Also make sure you have financial decisions made at proper time which will ensure financial security at any instant.