What should I know about accounting and bookkeeping for my business?
What Should I Know About Accounting and Bookkeeping?
The importance of keeping adequate records cannot be stressed enough. Without records, you cannot see how well your business is doing and where it is going. At a minimum, records are needed to substantiate: your tax returns under federal and state laws, including income tax and Social Security laws; your request for credit from vendors or a loan from a bank; and your claims about the business, should you wish to sell it. Most importantly, you need records to run your business successfully and to increase your profits.
How Do I Set Up the Right Record-Keeping System For My Business?
The kind of records and how many you need depend on your particular operation. Your accountant can provide you with many options.
What Financial Statements Will I Need?
You should prepare and understand two basic financial statements: (1) the balance sheet, which is a record of assets, liabilities and capital; and (2) the income (profit and loss) statement, a summary of your earnings and expenses over a given period of time. However, arguably the most important financial statement is one that shows cash inflows and outflows. Always remember—you can only spend cash, not profits.
We cannot be experts in all fields. Your attorney is by training and experience the best possible source of assistance in matters of law and statutes regarding business. A qualified legal advisor is essential to any business.
An accountant, like the lawyer, is your best ally. He/She is the expert source for advice on taxes and in making you aware of the health of the business. His/her expertise should be explored in providing aid for record keeping, finances, profit or loss and tax matters. A bookkeeper can provide much valuable advice on similar subjects, but does not have the in-depth training and experience to aid larger businesses whose finances and tax reporting are usually too complex for a bookkeeper’s expertise and whose domain is normally confined to record keeping.