When looking for accounting services you may be interested in finding out the basic details of accounting. It is prudent to do so since it is your business under review. Accounting basically keeps records of your business transactions.
Benefits of accounting
- At any moment in time, you can know how much you have in your cash account. This will enable you to identify a discrepancy in your bank account and your records of your cash account.
- You can always know when your inventories are running low. Your inventories account will always be updated whenever inventories are bought or sold. You can thus be able to prepare adequately so that you never run short of stock.
- You can also account accurately for your tax depreciation. This allows you to pay less tax.
- You can be able to forecast your future earnings based on the records of the past. You may review your accounting records for the past two years and identify the seasons when you did better than others. You can thus make plans to take advantage of these peak seasons so that you can bring in more.
- You are also able to know at a glance what you owe to suppliers and what suppliers owe you. A look at your accounts payable and receivables records will enable you to know your current position.
There are various types of accounts that bookkeepers normally will keep for you. It is good to familiarise yourself with each so that you know what you are looking at. Some of the basic records are:
You may make some sales on credit to some of your local customers. These are called accounts receivables in accounting language. The sales will be recorded as having taken place but to recognise that they were on credit, the accounts receivable account is created. As customers pay up what they owe, the outstanding balance in this account reduces. At the end of the month, you will know what you are still owed and by whom.
When you buy your supplies on credit, you also need to record that you owe some money to your suppliers. This amount is recorded in the accounts payable accounts. As you make payments during the month, the balance will reduce. At the end of the month, you will be able to know how much you still owe to your suppliers.
This account begins with an opening stock that is the inventory that you have brought forward in a new month. After this, you will record the inventory that you buy during the month as you buy it and also record when it goes out in terms of sales or for production purposes. The closing balance will be the unutilised inventory at the end of the month.
When you open your business, you will probably transfer your savings or loan to the business account. This is the cash account. It is what you’ll use to make your purchases and pay for your expenses. Money goes out, its balance will reduce. It increases when money comes in the form of sales and payments from customers.
These are the accounts for the regular expenses that you’ll incur. A ledger should be kept for each specific account to begin with. The expenses covered, in this case, would include electricity, rent, water, telephone, salaries and wages and depreciation.
These are just some of the basic accounts that your bookkeeper will set out for you. Most accountants will keep your business out of financial trouble and this company offers franchise and xero accountant expertise. Set aside some time for them to explain each account to you and anything that they find not to be in order. Your business will be better for it.