If you are starting a business, you need Progress of its goals.
Enterprises are based on the transaction. The accounting foundation starts with the system of recording and report transactions. Even if you plan to outsourcing accounting and bookkeeping, you need to read and understand your financial reports, which means understanding some basic business settings and accounting principles.
Let’s start with a series of problems:
1. What kind of business do you have?
Is it service, sales, manufacturing or information business?
Some companies are two or more types of mixed parties: the milkshake companies that import their own raw materials are manufacturers, but when they sell milkshakes, it is a single merchant. If it has a physical location, it becomes a service when the milkshake is ready and provided to the customer. If it offers how to sell milkshakes or smoothies, it is an information business.
Your business type determines the transaction that constitutes most of your accounting.
Following what is the equity structure? Solerable enterprises, partnerships, companies, limited liability companies (LLC) and cooperatives have different bookkeeping and banking business requirements. Learn more information about differences.
2. Do you have a business license and license?
You will need to open these commercial bank accounts and can correctly report your taxes. The files you need vary from business types and operations.
3. Do you have a separate commercial bank account?
Most ownership structure requires your company to have a separate account. However, if you can provide help,
It is recommended
You don’t want your personal transaction to mix with your business transaction.
4. Do you have employees?
If not, you will have a easier accounting process. But if you plan to hire employees, you need to set up a pre -deduction tax process.
Even if only you are now, you may still hire contractors for specific projects. The contractor who pays more than a certain amount in the United States must send 1099, so please:
[12] [12]3] Follow who you paid and how much you paid.
Get W-9 form from each contractor.
Archive the current address of everyone you hired.
5. Are there accounting software?
If you want hundreds or thousands of transactions each month, you will need account software such as QuickBooks or Freshbooks. Enterprises with less transactions can use Excel electronic tables, but companies with large transactions will not be able to keep up with the pace of manual input.
Accounting software can automatically execute most of the basic processes and allow you to avoid a lot of work. It records, stores and retrieve transaction data, and use it to generate financial statements and reports. Your accounting software can also create invoices and check checks.
If you decide to use accounting software, you can use QUICKBOOKS SYNC for WooCommerce or WooCommerce Freshbooks to synchronize your store data.
You can prepare for the next stage of the accounting process.
First, let us clarify some terms.
Transaction
In the accounting term, as long as the enterprise or supplier receives, receives or requires money, transactions will occur.
The transaction may be any of the following:
The owner invested in the company’s funds.
Sales revenue.
Invoice.
Wages, marketing, travel and construction costs.
Assets purchased, such as vehicles, office equipment, property or materials.
A single transaction can have multiple components. For example, when you pay an hour working, you must know the time for their work, their total salary, tax reduction and net salary. Your accounting software can perform all these tasks.
debit and the loan party
All transactions are tracked by the debit and the loan system. The best way to understand it is to use this basic accounting equation:
Asset \u003d liability + equity (owner or company)
Add the debit on the left side of the equation. A credit is added on the right. For a simple example, if you sell at a price of $ 500, then $ 500 will be debit, which means that it will be added to your business assets. It also records the owner’s rights in the form of income. Whenever you debit some things, you must record other things, because this can keep the equivalent balance.
This is a large simplified version we can spend a few books, but it allows you to basically understand what your accounting software is doing when you enter the transaction.
Accounting of cash laws and power and responsibilities
There are two basic accounting methods -cash method and planning method. The method is more common. According to your business scale and nature, the law may be required.
The basic difference between these methods is when When
confirm the transaction.
In cash accounting, the transaction was confirmed when the actual funds were transferred. In the accounting accounting accounting accounting, the transaction is confirmed when the work is completed and the invoice is sent. Suppose you ordered a new office paper in January and deposit it into your commercial credit card. You will immediately receive your office documents, but you will not really pay until February your credit card delivery bill arrives.
In an accounting system in power and responsibility, the transaction occurred at the moment you buy a paper. Essence You hold the receipt, store it in your file system, and record the cost. This is the cost of January, even if you have to wait until next January to pay. In cash accounting, the transaction occurred when you paid the bill. It was the time when the actual funds were easy. Therefore, this is the cost of February, even if you receive the paper in January.
The income is the same way. If you send an invoice to the customer in May, but they are not paid until July, the transaction should be used in May, but the cash method record is used in July.
Accounting of authority and responsibility is the preferred method, especially for large enterprises. It allows you to know more clearly about the cost of products or services you sell. If you buy paper in August, then the paper is part of your business operating cost -in August, not when you really start paying the bill. If you sell in May, then you sell at
5
, instead of remitting money to you in July when the customer has time to remit money.
The use of liability for use, you can check the business cost of each month, so you can check the highest profits incurred in the month Essence Calculate the border spacing with this formula: margin \u003d (income-commodity cost)/income
(In order to simplify this process, WooCommerce has an extension to calculate you Commodity costs, so you can calculate the cost of every specific product, one product category or you selected at any time of the product you sell.)
Three main financial statements
]
Using your accounting system and software and entering your transaction data, you will be able to prepare three basic financial statements: profit or loss statement (also known as the \”profit or loss sheet\” or P \u0026 AMP; L), the balance sheet And cash flow table.
Revenue proof
The profit and loss table report
The profit earned in the specified time period (for example)
. This profit is referred to when people use the term \”bottom line\”. Your profit is your net income. Or, if you lose money during that time, your net loss.
In short, the profit is calculated by subtracting costs from income. This strengthens the reason for the use of accounting methods for use. If you use the cash method, you will not be able to see you the actual income and expenditure of .
Asset -liabilities
Your asset liability statement reports that your assets, liabilities and rights and interests at a certain time point are usually at the end of the month, the end of the quarter, or at the end of the quarter. This is a snapshot of your financial situation.
Assets are valuable things, such as cash, supplies, equipment, vehicles, property, inventory and account receivables. \”Accounts receivable\” refers to the amount owed but not paid. Liabilities are what you owe, such as loans, interest payment, wages and any owed things. Liabilities are usually called \”account payables\”.
If you review the basic accounting and other forms listed earlier, you will find that equity is only a difference between assets and liabilities. Subtracting liabilities from assets, you have the so -called business \”book value\” or equity.
Cash flow table
] This is just a statement that shows the change of cash in your hand in a given time period.
As long as you enter the transaction data carefully, your accounting software can quickly generate all three basic financial statements. If you have no time, you may need to consider hiring the bookmaker.
Two final accounting foundations of small enterprises
1. Keep all receipts, invoices and payment records [123 ] The principle of reliability of accounting, only transactions with
should be recorded. If you do not have a transaction record, you cannot calculate it as an income or expenditure, which will disrupt your account book. If you try to apply for tax reduction for a fee you have paid to prove that you have no evidence to prove that you have paid, this may be called tax fraud. Therefore, the real receipt is preserved in the file. Or take pictures and store them in a digital manner. Save all the invoices and receipts sent through emails in a separate email folder, not just your general inbox.
2. Understand your tax requirements
Taxation It is required to vary depending on the type and location of the business. You need to know the sales tax, import tax (if you have any international transactions), the pre -deducted tax, the quarterly tax for payment, and any other taxes in your country, state, provincial, municipalities, or regions. These taxes will be included in your accounting software and financial statements. It is always recommended to consult with tax professionals to ensure that you follow the correct procedures.
Woocommerce covers accounting
Wooocommerce understands the daily responsibility of business owners. Manually entering transactions and creating financial reports may be time -consuming, but accounting is an important part of successful business. In order to reduce the burden of the owner, Woocommerce provides a variety of extensions from the key accounting process of dynamicization. Visit this page to obtain a complete list of accounting expansion of the WooCommerce store.
