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Small Business Accounting #101

Small business accounting software ranges from extremely simple to enormously complex enterprise-level solutions. The fact is that all organizations possess essentially the same requirements for recordkeeping whether it is a home-based self-employment venture or a large enterprise like General Motors. The difference between needing a simple bookkeeping system and a complex one is scale of operation.



Small Business Accounting and Bookkeeping Learning Topics:



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Checkbook Register vs. General Ledger

Checkbook Register | In the simplest of terms, a checkbook is a bookkeeping system. For every check written, an entry is made to the checkbook register to track the date, amount and who the payment is made to. Once a month, a statement of all transactions is compared against the check register to ensure that all monies are accounted for. This approach to recordkeeping is quite sufficient for personal accounting.

For a small business, however, complexity increases given the type of payment transactions. For example, a check written to a supplier represents an expense to be offset against sales, which will help to determine gross profit. A check written to a landlord represents an overhead expense, which is also relevant in terms of determining profitability, as well as breakeven. Accounting terms such as breakeven, expense, sales, gross profit and overhead all have different meanings relative to how they are accounted for as financial transactions.

General Ledger | A general ledger, like a checkbook register, is the place where all business financial transactions are recorded relative to whether they represent assets, liabilities, owners' equity, revenue and expenses. Regardless of the size of the business, every financial transaction needs to be recorded in the general ledger in a certain way. An easy to use small business accounting software package takes away the guesswork when setting up your general ledger. Once general ledger accounts are established, it becomes straightforward where and how to record financial transactions. When financial transactions are recorded properly, it becomes easy to determine at any point in time, how profitable the business is.

Did you know?

"...that you can choose a small business accounting software package tailored to your type of business industry? Intuit QuickBooks offers a QuickBooks Premier product line that supports the specialized needs of General Business, Contractors, Manufacturing and Wholesale Businesses, Nonprofit Enterprises, Professional Service Firms and Retail Operations."

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Other Small Business Accounting Learning Topics:
Bookkeeping | Accounting #101 | Accounting Software | Accounting Training & Support

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Note: This information has been compiled by the Knowledge Institute for Small Business Development (KISBD) for educational purposes only in order to convey a general overview of the options and related services available to small businesses in the subject areas introduced. Content is provided on an "as is" basis and is not intended to be an exhaustive representation, nor does it provide advice or create a customer relationship between KISBD and its sponsors, buzgate.org, its affiliates and any other organization named herein, and any reader.

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