So keeping this account accurate and always up-to-date is vital for when you need to meet tax reporting requirements. If your small business is one that has employees, then this could be the most significant cost and an account you can’t ignore when doing your books. It’s a big part of calculating the costs of goods sold which you subtract from the sales account to find your business’ gross profit. This is where you track any raw materials or finished goods that you buy for your business. The purchases account should also be something you look at when doing your books. What’s important here is that your books should carefully record all of the owners’ equity accounts. Instead, all of the money put into the business is tracked in capital accounts and money taken out appears in drawing accounts. Small businesses are usually owned by one person or a group of partners, so there are no real stock shares to divide the ownership. The owner’s equity account follows the amount each owner puts into the business. All of these expenses fall under the loans payable account which tracks what you owe and what’s due for you to pay. It can be anything from buying equipment like computers, vehicle to help you get from A to B when on the job or even furniture and other items for your business. Or whenever you make a sale - do whichever is easier for you and your business. Either periodically where you make a physical count of the inventory daily, monthly, yearly or any other period that matches your business needs. This part is important because the numbers you have in your books should match by doing physical counts of the inventory on hand. Plus, a cash account is arguably the simplest way to record cash payments, withdrawals and deposits.Īll of the products your business has in stock (whether they’re sitting at the back or still sat on the shelf) need to be carefully tracked and accounted for. A cash account is one where all of your business transactions pass through to track all of your financial activity. Perhaps the simplest one on this entire list. It’s important you keep this up to date so that you can send timely and accurate bills and invoices. If you sell a product or service and you don’t collect payment immediately, then your small business has receivables which you track in this account.ĪR is money due to your business from your customers. If you’re good at bookkeeping, then you’ll ensure timely payments but most importantly, you won’t end up paying anybody twice.Īccounts receivable (AR) is pretty much the exact opposite of accounts payable. Think of this account as one that represents the money that your business owes in the form of bills and invoices from vendors. However, accounts payable gives you a much clearer view of everything you spend. We get it, it always hurts a little inside when you have to spend money in your business. To help you get started, we’ve outlined 10 easy types of accounts and what they mean in an easy-to-understand way. These include accounts payable, inventory, cash and many more that we’ve outlined in this blog. To do the books for your small business, you need to be aware of all of the different account types. 10 Easy Examples of Bookkeeping for Small Businesses
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