All About Accounting by Amuro Wesley

ALL ABOUT ACCOUNTING BASICS AND FUNDAMENTALS WHAT IS ACCOUNTING? Basic Accounting Principles

BOOKKEEPING Careers In Accounting

ACCOUNTING SOFTWARE FOR SMALL BUSINESSES

COMPILED BY

AMURO WESLEY

CONTENTS 1.

What Is Accounting?

Basic Accounting Principles

More Accounting Principles

Bookkeeping

Careers In Accounting

Accounting Software For Small Businesses

WHAT IS ACCOUNTING?

Anyone who worked in an office at some point or another has to be involved in accounting. Especially those in relevant departments who pay and send out the bills that keep the business running. They do a lot more than that, though. Sometimes referred to as bean counters they also keep their eye on profits, costs and losses. Unless you are running your own business and acting as your own accountant, you'd have no way of knowing just how profitable - or not - your business is without some form of accounting. No matter what business you're in, even if all you do is balance a checkbook, that's still accounting. It's part of even a kid's life. Saving an allowance, spending it all at once - these are accounting principles. 1

ALL ABOUT ACCOUNTING

What are some other businesses where accounting is critical? Well, farmers need to follow careful accounting procedures. Many of them run their farms year to year by taking loans to plant the crops. If it's a good year, a profitable one, then they can pay off their loan; if not, they might have to carry the loan over, and accrue more interest charges. Every business and every individual needs to have some kind of accounting system in their lives. Otherwise, the finances can get away from them, they don't know what they've spent, or whether they can expect a profit or a loss from their business. Staying on top of accounting, whether it's for a multi-billion dollar business or for a personal checking account is a necessary activity on a daily basis if you're smart. Not doing so can mean anything from a bounced check or posting a loss to a company's shareholders. Both scenarios can be equally devastating. Accounting is basically information, and this information is published periodically in business as a profit and loss statement, or an income statement.

BASIC ACCOUNTING PRINCIPLES

Accounting has been defined as, by Professor of Accounting at the University of Michigan William A Paton as having one basic function: facilitating the administration of economic

activity.

This function has two closely related phases: 1. Measuring And Arraying Economic Data And 2. Communicating The Results Of This Process To Interested Parties. As an example, a company's accountants periodically measure the profit and loss for a month, a quarter or a fiscal year and publish these results in a statement of profit and loss that's called an income statement. 3

ALL ABOUT ACCOUNTING

These statements include elements such as accounts receivable (what's owed to the company) and accounts payable (what the company owes). It can also get pretty complicated with subjects like retained earnings and accelerated depreciation. This is at the higher levels of accounting and in the organization. Much of accounting though, is also concerned with basic bookkeeping. This is the process that records every transaction; every bill paid, every dime owed, every dollar and cent spent and accumulated. But the owners of the company, which can be individual owners or millions of shareholders are most concerned with the summaries of these transactions, contained in the financial statement. The financial statement summarizes a company's assets. A value of an asset is what it cost when it was first acquired. The financial statement also records what the sources of the assets were. Some assets are in the form of loans that have to be paid back. Profits are also an asset of the business. In what is defined as double-entry bookkeeping, the liabilities are also summarized. Obviously, a company wants to show a higher amount of assets to offset the liabilities and show a profit. The management of these two elements is the essence of accounting. There is a system for doing this; not every company or individual can devise their own systems for accounting; the result would be chaos!

MORE ACCOUNTING PRINCIPLES

If everyone involved in the process of accounting followed their own system, or no system at all, there's be no way to truly tell whether a company was profitable or not. Most companies follow what are called generally accepted accounting principles, or GAAP, and there are huge tomes in libraries and bookstores devoted to just this one topic. Unless a company states otherwise, anyone reading a financial statement can make the assumption that company has used GAAP. If GAAP are not the principles used for preparing financial statements, then a business needs to make clear which other form of accounting they're used. They are also bound to avoid using titles in its financial statements that could mislead the person examining it. GAAP are the gold standard for preparing financial statement. Not disclosing that it has used principles other than GAAP makes a company legally liable for any misleading or misunderstood data. These principles have been fine-tuned over decades and have effectively governed accounting methods and the financial reporting systems of businesses. 5

ALL ABOUT ACCOUNTING

Different principles have been established for different types of business entities, such forprofit and not-for-profit companies, governments and other enterprises. GAAP are not cut and dried, however. They are guidelines and as such are often open to interpretation. Estimates have to be made at times, and they require good faith efforts towards accuracy. You have surely heard the phrase creative accounting and this is when a company pushes the envelope a little (or a lot) to make their business look more profitable than it might actually be. This is also called massaging the numbers. This can get out of control and quickly turn into accounting fraud, which is also called cooking the books. The results of these practices can be devastating and ruin hundreds and thousands of lives, as in the cases of Enron, Rite Aid and others.

BOOKKEEPING

So what goes on the accounting and bookkeeping departments? What do these people do on a daily basis? Well, one thing they do that's terribly important to everyone working there is Payroll. All the salaries and taxes earned and paid by every employee every pay period have to be recorded. The payroll department has to ensure that the appropriate federal, state and local taxes are being deducted. The pay stub attached to your paycheck records these taxes. They usually include income tax, social security taxes pous employment taxes that have to be paid to federal and state government. Other deductions include personal ones, such as for retirement, vacation, sick pay or medical benefits. It's a critical function. Some companies have their own payroll departments; others outsource it to specialists. The accounting department receives and records any payments or cash received from customers or clients of the business or service. 7

ALL ABOUT ACCOUNTING

The accounting department has to make sure that the money is sourced accurately and deposited in the appropriate accounts. They also manage where the money goes; how much of it is kept on-hand for areas such as payroll, or how much of it goes out to pay what the company owes its banks, vendors and other obligations. Some should also be invested. The other side of the receivables business is the payables area, or cash disbursements. A company writes a lot of checks during the course of year to pay for purchases, supplies, salaries, taxes, loans and services. The accounting department prepares all these checks and records to whom they were disbursed, how much and for what. Accounting departments also keep track of purchase orders placed for inventory, such as products that will be sold to customers or clients. They also keep track of assets such as a business's property and equipment. This can include the office building, furniture, computers, even the smallest items such as pencils and pens.

CAREERS IN ACCOUNTING

There are many different careers in the field of accounting ranging from entry-level bookkeeping to the Chief Financial Officer of a company. To achieve positions with more responsibility and higher salaries, it's necessary to have a degree in accounting as well as achieve various professional designations. One of the primary milestones in any accountant's career is to become a Certified Public Accountant or CPA. To become a CPA you have to go to college with a major in accounting. You also have to pass a national CPA exam. There's also some employment experience required in a CPA firm. This is generally one to two years, although this varies from state to state. 9

ALL ABOUT ACCOUNTING

Once you satisfy all those requirements, you get a certificate that designates you as a CPA and you're allowed to offer your services to the public. Many CPAs consider this just one stepping stone to their careers. The chief accountant in many offices is called the controller. The controller is in charge of managing the entire accounting system in a business stays on top of accounting and tax laws to keep the company legal and is responsible for preparing the financial statements. The controller is also in charge of financial planning and budgeting. Some companies have only one accounting professional who's essentially the chief cook and bottle washer and does everything. As a business grows in size and complexity, then additional layers of personnel are required to handle the volume of work that comes from growth. Other areas in the company are also impacted by growth, and it's part of the controller's job to determine just how many more salaries the company can pay for additional people without negatively impacting growth and profits. The controller also is responsible for preparing tax returns for the business; a much more involved and complex task than completing personal income tax forms! In larger organizations, the controller can report to a vice president of finance who reports to the chief financial officer, who is responsible for the broad objectives for growth and profit and implementing the appropriate strategies to achieve the objectives.

6 ACCOUNTING SOFTWARE FOR SMALL BUSINESSES

If you think that starting your own business is cakewalk, you are very wrong. Aside from developing good products and services, you still need to sell them to the market. One of the essential factors in running a business is effectively managing finances. The language of any business, whether big or small, is accounting. The business scene is always loaded with work pressure. Therefore, there is an unerring need for handling accounts and finances effectively. Even small businesses need to be organized to achieve success and to do this the business owner should get the appropriate accounting software. Business units usually set long-term goals and to reach the goals, accounting management is required. 11

ALL ABOUT ACCOUNTING

If you want to be your business’ boss, you will need accounting software. Manually doing all the accounting works can lead to a lot of errors which can terribly affect any business. As owner of a small business, you have to know where funds come from and where it goes. If you decide to do accounting tasks manually, it can consume a great portion of your time and it will be cumbersome on your part. Here are some of the benefits that you will get in using an accounting software. 1. You can finish all the accounting tasks promptly. You will be able to run your small business without too much problems. 2. You can be provided with correct reports as well as special tools to make accounting tasks a lot simpler. That way, you can manage all the financial data of the business effectively. 3. In minutes, you can already manage the cash flow of the business. 4. With the accounting software, it will now be possible to predict revenues, bills, and generating reports. These are some of the benefits of using an accounting software. However, don’t purchase the first accounting software that you come across. You see, there are things to consider when selecting the proper accounting software for the business. You have to determine the software’s functionalities. It should be user-friendly and most especially, it should resemble the paper counterparts so that you can run the software smoothly. Once you’re familiar with the software’s layout, you can already explore its functionalities. If you can find software which combines the internet and e-commerce, the better; you see, there are a great number of accounting software sold in the market. If you want to enjoy all the benefits, you must be able to choose the finest accounting software that is suited to your small business. In choosing accounting software, you need to consider the number of your employees. You can find one suited for small business with less than 25 employees. Other software is suited for large businesses with bigger numbers of employees. A software that is suited for small businesses helps the business owner analyze financial data, customize reports like transaction history, profit and loss, check details, reconciliation details, and many more. By simply looking at the various reports, you can already determine your business status.

Accounting Software For Small Businesses

Some software also offers built-in features like forecasting tools. These tools can be used to manage business risks and control cost of operation. If you are running a small business, it is now time to purchase accounting software. By doing so, you can secure your businessâ&#x20AC;&#x2122; future and you can be certain that all your financial tasks are handled effectively.

PRODUCT RECOMMENDATIONS Here are some of my recommendations for the most reliable accounting software for your accounting and bookkeeping use. Bookkeeper enables you to organize and manage your daily accounting tasks from one screen. Easily write checks, pay bills, process payroll, invoice customers, track receivables, prepare for taxes, process credit cards, manage inventory, generate reports, and more. Bookkeeper gives you all the tools youâ&#x20AC;&#x2122;ll ever need at an affordable price.

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