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The Top 3 FAQs On Bookkeeping For Business Owners

by Wallace Hanson

If you're a business owner, then you know that bookkeeping is critical to your success. But keeping up with all the details can be tricky.

Here are some of the top FAQs on bookkeeping for business owners to help make the process a little bit easier.

What Basic Bookkeeping Concepts Do You Need to Know? 

If you're new to bookkeeping, or if you're just looking for a refresher, here are some of the key concepts you need to know:

  • Accounts payable: This is money that you owe to your suppliers or vendors.
  • Accounts receivable: This is money that your customers owe you.
  • Balance sheet: This is a financial statement that shows your assets, liabilities, and equity at a particular point in time.
  • Cash flow: This is the movement of money in and out of your business.
  • Equity: This is the ownership stake that you have in your business.
  • Income statement: This is a financial statement that shows your revenues and expenses over time.

Once you have a good understanding of the basics, you'll be able to keep better track of your finances and make more informed business decisions.

What Are the Different Types of Accounts?

There are three main types of accounts –– revenue, expense, and asset.

Revenue accounts include things like sales, service fees, and interest income. They show how much money is coming into your business. Expense accounts include things like office supplies, taxes, advertising, and travel. They show how much money is going out of your business.

Asset accounts include things like cash, inventory, and equipment. They represent the actual value of your business.

Keeping track of all three types of accounts is important for bookkeeping purposes. It will help you understand where your money is coming from and where it's going. Be sure to talk to your accountant if you need further clarification on how to optimize these accounts for your bookkeeping system.

What's the Difference Between a Cash Basis and an Accrual Basis?

There are two main ways to bookkeep –– cash basis and accrual basis.

Cash basis bookkeeping records transactions when the money is actually exchanged. This means that revenue is only recorded when it's received, and expenses are only recorded when they're paid.

Accrual bookkeeping records transactions when they occur, regardless of when the money is exchanged. This strategy relies on anticipated or expected cash flow.

Most businesses use accrual basis bookkeeping because it provides a more accurate picture of your finances. However, cash-basis bookkeeping may be simpler and easier to understand if you're just starting out. Your accountant can help you decide which method is best for your business.

But no matter which bookkeeping method you choose, be sure to keep accurate and up-to-date records. This will help you stay organized and compliant with tax laws.