Now that you’ve started, or are planning to start your own business, you have to know the ins and outs of bookkeeping. If you don’t know how to go about, it’s time that you educated yourself, because no matter how much you want to depend on an accountant, all financial decisions lie on your shoulders. Plus, you always need to be able to verify your accountant’s work as the ultimate accountability of your books lie with you.
So, here’s what you need to know about creating new books of accounts.
Get a System in Place
Back in the day, there was only one option when it came to bookkeeping and that was to note the various financial transactions in books. Today, the easiest and best DIY option is through software. There is a sea of software applications that can help you out. There are many software options that are free and affordable. You can even customize the software according to your business’s requirements. The other option is to hire an accountant who will take care of it (by using software, of course).
When it comes to journaling financial transactions, you have to two basic options – cash and accrual method. Cash method requires you to account for the financial transaction when the amount is actually paid or received. With accrual method, you can note the financial transaction when its promise has been made (in the form of a purchase order or an invoice), but you haven’t made or received the payment.
Creation of a book keeping system is vital. Even six years later, you should be able to access your 2015 accounts within a minute.
The reason it’s called books of accounts is because you are literally going to be keeping multiple books.