The art of knowing the details about where the money moves in a business is actually accounting because this art would help owners monitor the movement of the money in his enterprise. Now small enterprise owners would have to do the accounting cycle all by themselves because usually, the smaller enterprises would not need to hire an accountant. So if one is an owner of this type of enterprise, here are some things to know about small business accounting and bookkeeping.
Now when one would begin the cycle, he would of course begin with the journal entries as this is the recording of the day to day activities of the enterprise. Now one would have to buy a journal notebook or use a worksheet in order to jot down all the activities that would occur. As for the account titles, one can actually search the internet for them if he does not know them.
After one has compiled all the activities of the month in a journal notebook, the next thing that he has to do would be to organize the information in the ledger. Basically, one would be combining all the amounts of the journal under the one general title in the ledger. This is to make sure that all titles would be organized properly.
Once the ledger has already been created, then one now has the total amount of all the account titles. From there, one will now be able to make the trial balance to get ready for the balance sheet. Basically, one would now be tallying the numbers in the trial balance so that he will minimize his mistakes made in the balance sheet.
After he has made the trial balance, then the next thing that he will be making would be the balance sheet. Now for those who do not know about the balance sheet, basically, it is the statement that would separate all the assets, liabilities, and capital accounts. The total assets would have to equal the liabilities plus the equity accounts.
After the making of the balance sheet, then the next statement to create would be the income statement. The income statement contains all the income of the business and the expenses as well. When all those accounts are collected, then one will be subtracting the expenses to the income to know if the business has incurred a gain or a loss.
Now the very last step to take in the cycle would be to create a statement of equity which would look at the capital accounts. These capital accounts are the beginning capital, the investments made by the owner, the withdrawals, and the ending capital. Now basically, he will be subtracting the withdrawal and adding the additional investments to produce the ending capital.
Now after he has created those financial statements, he will more or less have an idea if his enterprise is actually doing well or not. Now the thing about small enterprises is that since it is not very big, an official accountant may not be needed for the process. However, it also means that the owner has to be adept at following the accounting cycle and creating the financial statements.
Now when one would begin the cycle, he would of course begin with the journal entries as this is the recording of the day to day activities of the enterprise. Now one would have to buy a journal notebook or use a worksheet in order to jot down all the activities that would occur. As for the account titles, one can actually search the internet for them if he does not know them.
After one has compiled all the activities of the month in a journal notebook, the next thing that he has to do would be to organize the information in the ledger. Basically, one would be combining all the amounts of the journal under the one general title in the ledger. This is to make sure that all titles would be organized properly.
Once the ledger has already been created, then one now has the total amount of all the account titles. From there, one will now be able to make the trial balance to get ready for the balance sheet. Basically, one would now be tallying the numbers in the trial balance so that he will minimize his mistakes made in the balance sheet.
After he has made the trial balance, then the next thing that he will be making would be the balance sheet. Now for those who do not know about the balance sheet, basically, it is the statement that would separate all the assets, liabilities, and capital accounts. The total assets would have to equal the liabilities plus the equity accounts.
After the making of the balance sheet, then the next statement to create would be the income statement. The income statement contains all the income of the business and the expenses as well. When all those accounts are collected, then one will be subtracting the expenses to the income to know if the business has incurred a gain or a loss.
Now the very last step to take in the cycle would be to create a statement of equity which would look at the capital accounts. These capital accounts are the beginning capital, the investments made by the owner, the withdrawals, and the ending capital. Now basically, he will be subtracting the withdrawal and adding the additional investments to produce the ending capital.
Now after he has created those financial statements, he will more or less have an idea if his enterprise is actually doing well or not. Now the thing about small enterprises is that since it is not very big, an official accountant may not be needed for the process. However, it also means that the owner has to be adept at following the accounting cycle and creating the financial statements.
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