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As a small business owner, you’re the one in charge of keeping your books in order. Get started with our 2-minute accounting basics tutorial.
Want more accounting basics and training? We upload videos every other Thursday with more helpful accounting tutorials for small business owners!
Hi, my name is Aurora, and I’m here at Patriot Software with an accounting basics tutorial of what all small business owners should know.
We get it: you’re a small business owner, not an accountant. But as the owner, you’re in charge of making sure your books are in order.
So, where can you start? Begin with using a cash-basis accounting system. It’s basic accounting: cash in, cash out. You record transactions as money changes hands.
Now, what should you record? Record all incoming and outgoing transactions. The more in-depth your records are, the better.
Your incoming transactions will include:
What you sold
Who you sold it to
How much revenue you collected
The date you received payment
And, if applicable, how much sales tax you collected
Your outgoing transactions will include:
The taxes you paid
The employees you paid
And, your business overhead costs, like office supplies and rent.
Keep track of every dollar that goes in and out of your company. Many payments you make may be deductible based on your income or business structure.
Next up on our accounting basics tutorial, how do you record these transactions? You should place every dollar you collect on its own separate line. Do the same thing for every expense. Record where the money went, or where it came from. Do this so you know which payments qualify for tax breaks and how much of each payment you received goes to taxes.
You should also consider organizing each transaction into a chart of accounts, separating your:
Asset accounts, like checking accounts and savings accounts
Expense accounts, such as insurance, payroll, and rent
Income accounts, like money made from products and services
Doing this will not just help make filing taxes easier, but it will also help you understand your business’s cash flow.
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