Tuesday, 24 May 2016

Accounting for small businesses

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Hello readers, today I will be writing about accounting for small businesses with a specific focus on book keeping. A business must have an accounting procedure to ensure that its income and expenses are monitored promptly as well as its assets and liabilities. Basically, a small business will be required to carry out book keeping procedures, as well as, preparing financial statements for the year. Tax calculations must also be carried out for official purposes, after that being said I will be focusing on book keeping.

Book Keeping is the recording of the daily financial transaction of a business. Transactions include revenues, assets, expenses and liabilities. I will be writing briefly about the double entry principle, I do not want to turn this it into accounting class.According to the double entry principle, for every debit entry there must be a corresponding credit entry and vice versa. An increase in assets and expenses must be debited, while an increase in income and liabilities must be credited and vice versa. Expenses are debited this is because it makes the equity of the business to decrease.

Daybooks are used to record the daily financial transactions, these books include the Sales daybook, Purchases daybook and others. Ledgers are also used for recording financial transactions. Sage is a good software that can be used to record financial transactions, the sage accounting  software can be easily used after a short training. It is advisable to get a software rather than recording your transactions in a book. 

Keep checking out my blog regularly, cheers!

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