When you think "Accounting" do you feel confused or intimidated?
Don't be.
Here's a simple overview of some basic Accounting information you need to know for your small business.

It would be helpful to learn some basic accounting concepts before you try to learn the specifics of accounting for small business.

There are a few "rules" for this process. These rules are called Generally Accepted Accounting Principles, or G.A.A.P. (pronounced "gap"). These accounting principles are supposed to keep all accounting information useful and relevant. And to keep businesses from "fudging" or playing with the numbers. Not to say that never happens...

But not here. We want our small business accounting to be accurate. For example, we don't include our personal expenses in with our business expenses. And we record 30 days of income with 30 days of expenses on our Income Statement for the month. There are more rules, but we'll leave that for the CPA's for now.

We're talking about basic accounting concepts here. I don't want to confuse you with a lot of Accounting textbook concepts and processes. After all, most if not all of you will be using accounting software, which does most of the background work for you. So you don't have to know debits from credits or the old assets=liabilities+capital, although I may address some of that in another section, for those of you that want to know.

One of the basic accounting concepts you need to know about is the Accounting Cycle. You've heard of the Circle of Life? Well, think of this as the Circle of Accounting.

Every event, like paying a bill, leads to a transaction, in this example a check.

That transaction (the check) is posted into a journal (think checkbook).

These transactions in the journal are gathered together into a financial statement (think bank statement).

That's the Accounting Cycle.

I've just touched on the word "journal" above.

Accounting journals are what we call books of original entry, which just means that you're capturing transactions as they happen, be it a check written, a sale collected on, or a purchase made. Whatever happens, there's an accounting journal for it.

We have:

*cash disbursement journals
*cash receipts journals
*sales journals
*purchase journals
*payroll journals

Well, you get the idea.

If you're using an accounting software program, the software compiles these journals for you as you enter a sales receipt or write a check, for example.

If you're using a manual system, don't despair, it's not that hard to do it yourself.

Check out these pages:
How to set up and use a Cash Disbursements Journal
How to set up and use a Cash Receipts Journal

Remember in the explanation of the Accounting Cycle, we had transactions, journals, and then statements.

Financial statements are very important and useful to you as a small business owner. They show you the health and value of your business (Balance Sheet) and how much profit you're making (Income Statement).

If any of these terms seem confusing, I have definitions of some common accounting terms on my Accounting Glossary page.

Just a thought...even the most basic accounting for small business can differ based on type of business. There are many types of small businesses, from retail to manufacturing to service to non-profit. There are home-based businesses too. Each business has its own little twist on things.

I'll try to cover most business types in these pages.

Today almost every business owner has a computer. Most of you will be using some type of accounting software, I guess. I personally use Quickbooks. I didn't like it at first, because it's not made for accountants. It's made for small business owners. Perfect, right?

The more I got into using the software, the more I grew to like the many reports and ease of moving around my clients small business accounting info. If you use another software, that's great, but please excuse the Quickbooks references.
So, enough about that.

In the next pages, we're going to go over some ways to help you set up and organize the accounting for your small business.

So go to the next page and let's talk about setting up your office.

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