Let’s face it, most entrepreneurs and business owners don’t know anything about double-entry bookkeeping, and they don’t want to know. For big companies, that’s no problem: you only need to hire bookkeepers Sydney. But in the early days, you might not be able to do everything. Even if you go to an accountant to help you prepare your annual tax return, you need to know the basics of how to save your documents throughout the year.
Why does that matter? Because having a good record is a good business foundation. If you do not have an accurate understanding of your financial situation, your plan will be based more on guesswork. Investors or lenders also want to see well-organized finance before they commit to funding your business.
If you want to have a comprehensive picture of how your business works, you have to set up several different accounts. That means divided according to the main areas of your business, you track every transaction that gives effect, and adjust the balance sheet. That way we know exactly how much we have at any time. We do the same thing with a cash account.
Apart from cash and inventory, here are some other important accounts to track:
• Receivable Accounts.
• Accounts Payable.
• Sales (income that you generate from selling products/services).
• Purchases (supplies that you buy for your business).
• Payroll Expenses (staff salaries and other costs).
• Owners ’Equity (the amount that you or other owners put into the business).
• Retained Earnings (profits that you collect).
Depending on how many details you want to enter, you can create a variety of different accounts that track various aspects of your finances. For example, you can divide the inventory account into sub-accounts.
For larger companies, the number of accounts can multiply quickly, so it’s important to create a chart of accounts from the start: a list of all the accounts that you maintain, with numbers for each account.