Accounting For Beginners
So, you have started this new and incredibly exciting business opportunity. How will you keep track of it in writing? Enjoy it or not, april 15th every, we have to take into account our actions the year before to our friends (or foes depending upon your state of mind) at the inner Revenue Service, or the IRS.
Even if you have already began your business, I am going to write this as if it were day one for you. For the purposes of this article, I am let’s assume that you are starting a simple also, sole proprietorship business. In order for the IRS to think about your business legitimate, you need to take care of it like a business rather than a hobby. One thing that you must do is to open a separate checking account just for your business, and keep all business finances separate from your personal finances. 1 cardinal rule that I follow religiously in all of my businesses. I NEVER take money from the cash drawer to buy a soda.
And if I use personal budget to make business buys, I save the receipts and record them in the books for my business as a rise to my owner’s investment account. The majority of you aren’t accountants probably, and the word “accounting” sends you screaming in to the streets. The word “taxes” also causes a lot of you to tremble. But really, they shouldn’t, they are just words, and both accounting and taxes can be very simple.
- IRC § 6701 Aiding and Abetting Understatement of Tax Liability
- General Services Administration (GSA) BPA,
- Pipes and filter
- Dynamic In Nature
- 28Professional Pooper Scooper
- I have absolutely no fascination with discussing my food intake with you
- Advertising and Promotions
- Personal Property Tax/Vehicle Tax
As your business expands and diversifies, you may want to get a little more complicated, but also for now, you will keep your books on a simple excel spreadsheet, or one of the many accounting software packages out there. I personally like QuickBooks Pro since it is very user-friendly and very forgiving when you make errors. For a beginner, it is effective.
Accounting is really simple: there are three basic financial claims that you need to understand to perform your business. You get that Once, filing a routine C for your taxes is easy. The first of these forms is the total amount Sheet. It is a comparison of your assets (things that make you money) on the still left, and liabilities (things that you owe) and equity (the net value of your business).
Assets include current property like: profit bank, savings, inventory, prepaid expenses (like insurance), accounts receivable (money owed for you) and set assets. 1,000 should be depreciated and capitalized over time. Liabilities are: the bills that you borrowed from, any loans and bank cards for your business. Equity is the amount of money which you have personally committed to your business and the retained earnings from your business.
The second and probably most important financial record is the Income Statement. It really is a snapshot of your business activity at an ongoing point in time. A month to maintain on where you stand profit-wise I encourage you to prepare one at least once. The third financial form that you should prepare frequently, at least weekly, is a cash flow statement.
I have seen many types of these over time, and they can be quite complicated, but put simply, you want to see where your money position is. It is exactly like controlling your check book. Ending Cash. Simple enough, but very important. Many new businesses fail simply because they do not keep an eye on the activity of their businesses in writing.
Stuffing money in your pocket that later would go to pay for the pizza and ale is not the way to go. Every action you take creates an action in your books. Keep track of them. Be structured. If you keep these three financial claims up to date for your business, not only will you have everything at the finger tips at taxes time, but you will have a monitor of how you are doing.