September 21, 2018
If you’re the owner of a start-up or recently incorporated business, it can be helpful to know the basics of bookkeeping, whether you will be using the services of a paid professional, or not. Here are 4 main steps of the bookkeeping process that it can be helpful to understand:
These may include cheque records, deposit records, bank statements, bills from vendors, receipts for purchases and invoices issued to customers.
Information from source documents must be entered into journals and accounts.
These can include balancing accounts and performing reconciliations.
It’s vital that the books for each set period are closed.
Here are a few of the bookkeeping terms explained in a little more detail for new small business owners:
Most business transactions will go through your cash account and can be divided between cash receipts and cash disbursement. At the end of each month, it’s important to reconcile your bank account for any outstanding transactions or mistakes. The total reconciling items should add up to the difference between the dollar amount on the statement from the bank and the dollar amount in the accounting records.
This describes the money that is due to your business from your clients for products or services purchased, but not yet paid for. A sub ledger will have the details of each different account and each one should be reconciled to the total accounts receivable listing to make sure that they balance.
This can refer to the ready-to-sell, work-in progress or raw-goods inventory, and physical counts of inventories should be carried out regularly to ensure that they correspond with the accounting records. This can be a very complicated procedure if any part of the inventory tracking procedure is not carried out accurately.
Akin to accounts receivable, your payables are usually representative of money that suppliers are owed from the business. As with accounts receivable, it’s highly important that the account is reconciled to make sure that what is being recorded is for current and ongoing financial obligations.
In smaller companies, loans payable refers to amounts that have been loaned to the business from shareholders, friends or family. Even if your company is not currently paying the loan, it’s advisable to be aware of any interest that is to be charged.
This is the income that a company has earned directly through the sale of its products or services.
All expenses that a business has incurred will be recorded here, in the expense accounts. They are usually divided into different categories such as office expenses, rent, insurance and cost of goods sold.
This can prove to be one of the biggest expenses for a company, and these accounts can include salary that is paid to employees, vacation paid, employee benefits and EI contributions, or Employment Insurance.
Understanding the basics of bookkeeping when you own a start-up is always helpful, but be advised that it is by no means a substitute for a paid professional.
Changes to tax legislation mean that small businesses the world over are getting a break on their taxes, and the legislation is one of the most significant tax overhauls passed in decades. It’s responsible for providing pass-through businesses and corporate entities with lower tax rates.
Here are some of the biggest...
Many U.S. citizens use tax preparers at tax time, and competition can be fierce as tax professionals vie for your business. With around 150 million taxpayers seeking help with preparing and planning for their taxes, the business is a lucrative one and some preparers may try to tempt you with talk of low rates and gimmicky promotions, but then they may quickly add...
EA stands for ‘Enrolled Agent’ and this is the highest credential that the IRS award to tax Professionals; it’s recognized in all 50 U.S. states. Attorneys and CPA’s or ‘Certified Public Accountants’ are licensed on a state by state basis, and they are also empowered by the Department of the Treasury to represent taxpayers...