Bookkeeping Basics You Need to Know for Your Business
Many factors contribute to the success of your business, such as your company's message, your products, your team and how your business operates. All of these factors work together to help keep your business growing and to help you achieve your business goals.
Looking at it from a macro perspective, it could look relatively easy, especially if you're fueled with passion and you have the right team behind you. However, what pushes your business to keep going lie on the tiny details in operations, such as your business's finances. This is why small business owners need to hire a business accountant to help keep their finances in check through bookkeeping and other accounting practices.
If you're unsure of how bookkeeping works and you need to start recording your finances, keep reading. In this article, we'll share basic bookkeeping concepts you need to know for your business. Let's get to it!
Your trial balance, also known as your general ledger, is a list of your business's accounts. This is where you record and classify all of your business's transactions as a "journal entry." With this, you'll be able to organise the two main financial reports your business needs, which are the balance sheet and the profit and loss.
Below is a list of terms that will help you understand your general ledger, which could help you with your business’s bookkeeping routine.
A balance sheet gives you an overview of your business's assets, liabilities and shareholder equity. It gives you an organised bird's eye view of what your company owns, what it owes and investments you made every day.
Liabilities refer to what your business owes to other parties and how you paid for your other assets. These may include unpaid bills, accounts payable, loans, insurance, business taxes, employee wages and more.
Equity, Profit & Loss and Expenses
Shareholder equity is the capital that is introduced and withdrawn by you or shareholders for your business. It's basically the balance of what you own minus what you owe.
On the other hand, profit & loss refers to your business's cash flow due to your sales and income. And finally, expenses are the part of the general ledger that deals with your business's obligations and the money that goes out with it.
An important bookkeeping element that your business accountant will need to focus on is charting all of your accounts. A chart account is a list of funds in your general ledger that breaks down and categorises in more detailed and larger classifications.
A chart of accounts will help your accountant develop and amend your accounts and help spot financial issues to help you meet the needs of your business.
From cash flow to bank loans and other financial statements, these three main reports or financial statements are essential financial elements you and your accountant should record and organise to help you understand the financial status of your business.
Ideally, financial statements should be updated and recorded regularly so you can immediately find grey areas and focus on figuring out solutions to solve business financial issues.
As a business owner, there are several departments and tasks you need to focus on daily, and one of the important things that keep your business running is being on top of your finances. This is why many business owners work with expert business accountants to help them with their business's finances. By remembering these tips and working with a reliable accountant, bookkeeping won't feel like a chore and your business's finances will run more smoothly.
If you're looking for small business accountants on the Gold Coast, check out New Wave Accounting. We are an accounting and business advisory firm that provides end-to-end accounting and bookkeeping services that help scale and grow small businesses. Contact us today!