When you start working, you need to understand accounting principles to judge the status of the organization and the progress of its goals. Business is transaction based. The basis of accounting begins with a system for recording and reporting transactions. Even if you plan to outsource accounting and bookkeeping, you must be able to read and understand financial reports, which means you must understand some basic business settings and accounting principles. Let’s start with the following series of questions: 1. What business are you doing? Is it service, processing, manufacturing or information business? Some companies are a mixture of two or more types. The wheat milkshake business, which imports its own raw materials for processing, is a manufacturer, but if it sells milkshakes, it is Mohammed. If there is a physical location, a milkshake can be prepared and provided to the customer. If you offer a course on how to sell milkshakes or milkshakes, it is information commerce.
Your type of business determines the transactions that make up most of your accounting. Second, what is the ownership structure? Individuals, partners, corporations, limited liability companies (LLC) and partners have various bookkeeping and banking requirements. Learn more about the differences. 2. Do you have a work permit and permit? You need this information to open a business bank account and report taxes correctly. The required documents vary by business type and operational location. 3. Is there a separate commercial bank account? In most ownership structures, businesses must have separate accounts. However, if it may be helpful, it is recommended that all businesses that do not want personal transactions to be mixed with business transactions.
4. Are there any staff? Otherwise, you will experience simpler accounting procedures. However, if you plan to hire employees, you must set up a source collection procedure. Now, even if it’s just you, you’ll hire contractors for specific projects. In the United States, a contractor who pays more than a certain amount each year must send 1099, so it must: Track payers and payment amounts. Please receive form w-9 from each signatory. Archive the current addresses of all employees. 5. Do you have accounting software? If you expect hundreds or thousands of transactions a month, you will need accounting software such as QuickBooks or FreshBooks. Enterprises with small transaction volume can use Excel spreadsheet to get rid of it, but enterprises with large transaction volume cannot catch up with manual input.
Accounting software can automate most of the necessary processes and perform a large number of tasks in hand. Record, store and retrieve transaction data and use them to generate financial statements and reports. Check and accounting software can also generate checks. If you decide to use accounting software, you can use woocommerce or QuickBooks sync of woocommerce FreshBooks to synchronize store data. If these basic problems are solved and the business foundation is established, it is ready for the next step of the accounting process.
Let’s clarify some terms first. In business accounting terms, a transaction occurs at each payment or request from a business or supplier. Transactions can be: The owner’s money to invest in the business. Sales revenue. Invoice. Salary, marketing, travel and construction expenses. Assets purchased, such as vehicles, office equipment, property or materials. A single transaction can have multiple components. For example, you must know the hours of work, total wages, tax deductions, and net wages at which employees are paid per hour. Accounting software can perform all these operations.
All debit and credit transactions are tracked by the debit and credit system. The best way to understand this is to use the following basic accounting formula: Assets = Liabilities + capital (small)
Grapefruit (or company) debit is added to the left side of the equation. Credit will be added on the right. For example, if you sell for $500, the corresponding $500 will be deducted and added to the business assets. In addition, in the form of income, the owner’s capital accumulation. Every time a debit occurs, you have to fill in different things on the debit. Because it keeps the equation in balance. This is a very simple version, which can be described in several books, but when entering transactions, it provides the basic idea of the operation of accounting software.
Cash method and accrual accounting have two basic methods: cash method and accrual accounting. The accumulation method is more general, which may be required by law according to the scale and nature of the enterprise. The basic difference between the two methods is that transactions are identified. In cash accounting, transactions are recognized when the owner of the actual currency changes. In specific value accounting, transactions are identified when the operation is completed and an invoice is sent. Suppose you ordered new office paper in January and put it into your business credit card. Office paper will be received immediately, but the credit card bill will actually pay by February.
In stock accounting, the transaction takes place at the moment of buying paper. Receive the receipt, save it to the file system and record the cost. Even if the fee is not paid until the next year, it is also the fee in January. In cash accounting, transactions occur when bills are paid. At that time, the actual money will change hands. Therefore, even if the paper is received in January, it is also the cost of February. Revenue operates in the same way. If the invoice is sent to the customer in May and the customer does not pay before July, the transaction will be recorded in the occurrence method in May, but the transaction will be recorded in cash in July. \
Through the specific value method, you can adjust the business cost every month, so you can see the month with the highest profit. Calculate the margin using the following formula: Profit = (revenue – cost of goods) \/ revenue (to simplify this process, woocommerce has an extended function to calculate the cost of products, so it can calculate the cost of specific products, product categories or all products sold during the selected period). Three basic financial statement accounting systems and software are installed. After inputting transaction data, the income statement (also known as \
Income statement the income statement reports profits for a specific period, such as a month. This is what people refer to when using the term \
Assets are valuable possessions, such as cash, supplies, equipment, vehicles, property, inventory and sales bonds. \
This is a simple statement of what has happened to the cash of Angui river. These three basic financial statements can be quickly generated through accounting software, as long as you input transaction data diligently. If you don’t have time, consider hiring an accountant. Two final accounting basic events for small enterprises 1. Keep all invoices, invoices and payment records. According to the principle of accounting reliability, only transactions with vouchers can be recorded. Without transaction details, you can’t calculate income or expenditure, and the accounts will become a mess. If you want to request the deduction of the expenses of the voucher without paying the expenses, it can be said to be tax fraud. Therefore, please file the actual invoice. Alternatively, take pictures and save them digitally. Keep all invoices and receipts received by email in a normal inbox and a separate email folder. 2. Understand the tax requirements, which vary according to the type of business and operation location. Sales tax, if there is an international transaction, you should know about import tax, source collection, quarterly expected tax and other taxes specific to country, state, local, city or region. These taxes are reflected in accounting software and financial statements. To ensure that you follow the correct procedures, it is recommended that you always consult with a tax expert. Woocomerce includes accounting. Woocomerce understands the daily responsibilities of business owners. Manually entering transactions and generating financial reports can take a long time, but accounting is an essential part of running a business successfully. In order to reduce the burden on store owners, woocomerce provides a variety of extensions to automate major accounting processes. To view the full list of account extensions for the woocommerce store, visit this page.
