The backbone of small business accounting lies in proper record keeping.
This basically entails the orderly and disciplined practice of storing business records. Business success depends on creating and maintaining an effective accounting system via keeping good records.
An effective accounting system is one of the most important responsibilities of any small business owner.
This is applicable regardless of the number of persons employed, type of services provided, period of operations, financial status or the entity type, be it a sole proprietorship, partnership, limited liability company, C corporation or a S Corporation.
Recordkeeping not only facilitates regulatory compliance but also provides owners with relevant and timely information to help in making good business decisions.
The importance of small business accounting is amplified in that it allows the business owner to monitor business performance and prepare timely financials.
Three fundamental financial statements are:
1. The income Statement
2. The Balance Sheet
3. The Cash Flow Statement
Having a proper accounting system allows for:
1) Identify sources of income
2) Track deductible expenses
3) Track basis in property
4) Prepare and support items on tax returns
Just like how having a good accounting system in your small business supports positive management functions and decisions, poor recordkeeping practices can lead to the small business failure.
User | 13/12/2021