The purpose of using small business accounting software is to prepare your books for your CPA, or to just make your accounting all-around easier. Maybe
Last week’s article extolled the virtues of budgeting…and the vital reasons why your business – and EVERY small business – should create and operate with
The purpose of closing the books is to make sure that all the financial information about your business is accurate and entered properly.
The balance sheet is typically used to calculate the net worth of the business, and includes liabilities, cash, and equipment. A basic tenet of double-entry bookkeeping is that the total assets (what the company owns) should equal the liabilities plus equity, i.e. the books should balance. Subtracting the liabilities form the assets reveals the net worth of the business.
Understanding the types and hierarchy of the line items in your chart of accounts will make it easier to maintain clean books, and use your accounting software properly. The chart of accounts categories fall under a few basic groups: income and expense, assets, liabilities and equity accounts.
Smart business owners need to be sure their accounting departments are sufficiently familiar with changes in tax law, or they need to seek help from accounting services that are paid to keep up with regulatory changes.
Many small businesses are structured as S corporations of LLCs, which means the owner’s personal taxes are intimately tied to their businesses. The flow-through income from the business has to be reported on the owner’s tax returns.