What is Accounting & Bookkeeping?
Posted on July 28, 2014 byIt is the goal of this column to answer questions about QuickBooks and how it is used in the REI arena. Knowing how to record transactions in the proper way and have your set of books in good shape when it comes time for taxes. It is our intention to do this with you, the members, submitting questions to Karen@smallbusinessadvisor.biz, and getting answers here in this column.
Q: I am new to having my own business – just what is accounting?
A: Accounting is the process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties. An accounting system is designed to accumulate data about a firm’s financial affairs, classify the data in a meaningful way, and summarize it in periodic reports called financial statements. Owners and managers obtain a lot of information from financial statements. The SBA helps to:
- establish the records and procedures that make up the accounting system
- and/or may supervise the operations of the system
Once the books are in good order they can then be passed on to the CPA to either work with the owner to suggest strategies and/or prepare taxes. Most owners and managers rely heavily on the CPA’s judgment and knowledge when making financial decisions.
Q: Why do I need to have an accounting program or a bookkeeper?
A: To run your business successfully, you need financial information about the business. You probably need information that provides answers to the following questions:
- How much cash does the business have?
- How much money is owed to the business?
- What is the cost of the repairs on the individual property?
- What is the profit on the sale of the property?
- How much money is owed to suppliers?
- What is the over all profit or loss of the business?
As your business grows, you will need even more financial information to evaluate the firm’s performance and make decisions about the future. An efficient accounting system allows owners and managers to quickly obtain a wide range of useful information. The need for timely information is one reason that businesses have an accounting system directed by a professional staff. By having a professional handle your books you have more time to develop your business. If all this feels overwhelming call 770-356-1234 and ask for Karen.
Q: Why would I hire a bookkeeper when I can write the checks myself?
A: There is more to bookkeeping than writing the check. You should also be recording income – who paid you, for what type of service and how much. The proper way is to record an invoice, (even if it is only for internal purposes), and then apply the payment to the invoice. There are long term debts such as mortgages and/or other loans/notes that you are making payment to. These will involve principle and interest and need to be recorded to show up on the proper financial statement. You should have a good understanding of how the Income Statement and the Balance Sheet provide you with information on the state of your business. You cannot do this if only part of the information is being entered into the books – e.g. writing checks. If you have any questions on how a bookkeeper can assist you with your business call 770-356-1234 and ask for Karen.
Karen Bershad is The Small Business Advisor. Most small business owners have a challenge handling all the different areas of running a business. The accounting can be a challenge, particularly if the software seems overwhelming. The Small Business Advisor is what you may need to get you to the next level of your business. We work at your office or provide off site assistance in getting things under control by providing a wide variety of services that are specifically for the small business.
