Many small business owners are not aware of the accounting system and the basics of bookkeeping. The most common reason for this is that business owners don’t understand the significance of bookkeeping.
Bookkeeping plays an important role in the success of small businesses. There are two basic types of bookkeepers which are the manual bookkeeper and the computerized Vancouver bookkeepers.
The manual bookkeeper
These bookkeepers are the most common type of bookkeepers. They use pen and paper for keeping the accounts of the company. These bookkeepers also manually enter the data into the ledger.
This type of bookkeeper is highly expensive and needs a good memory to be successful. It is also hard to keep records of the transactions and prepare financial statements.
The computerized bookkeeper
These bookkeepers use software that stores the accounts of the company and also automatically enters the data into the ledger. These bookkeepers can be used by the company as well as the individual.
There are many benefits of the computerized bookkeeper and the biggest advantage is that it saves a lot of time and money. It is also easier to keep records and prepare financial statements.
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Top Accounting Concepts That You Must Know
If you are a small business owner, then you must have a basic knowledge of accounting. Small business owners need to understand the accounting concepts that are used in any kind of business.
The Importance Of Accounting In Small Business
Small businesses are known for the fact that they can create new jobs for themselves. The reason behind this is the fact that they are not required to pay huge salaries to the employees.
However, it is not a good idea to run a business without any accounting knowledge. The main reason behind this is that small business owners cannot understand the amount of money that they have earned and how much they spent.
If you have started a business and if you don’t have the skills of accounting then it is the right time that you should start learning it. Here are some of the important accounting concepts for small business owners.
Accrual Accounting
The first step of accounting is to understand the difference between accrual and cash accounting. Accrual accounting is when the expenses are recorded in the period when the payment has been made. On the other hand, cash accounting is when the expense is recorded when the payment has been received.
Balance Sheet
A balance sheet is an annual statement of a company. It is prepared to show the financial status of the company. The balance sheet shows the total assets, liabilities, equity, and profit.
Cash Flow Statement
A cash flow statement is a detailed statement of a company’s income and expenses. This statement is prepared to show the flow of cash in and out of the business.
Income Tax
The income tax is a way of calculating the tax of a company. It is a tax that is calculated based on the income of the company.
Debtors and Creditors
A debtor is a person who owes money to another person. A creditor is a person who has loaned money to another person.
Profit and Loss
This is the most important part of accounting. It is an annual report that is prepared to show the profit and loss of a company.
Conclusion
I hope that this article was helpful to you. These are the Top Accounting Concepts, in conclusion, that you need to understand. Small business owners should be familiar with the ideas mentioned above.
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