Accounting is one of the most important aspects of a business simply because it is the only way one will be able to monitor the inflow and outflow of money. If one owns a small enterprise, he does not need to hire a really good accountant as he can be able to handle the numbers himself. The least that he is supposed to know would be basic small business accounting and bookkeeping.
Now when one would begin the cycle, he would of course begin with the journal entries as this is the recording of the day to day activities of the enterprise. Now one would have to buy a journal notebook or use a worksheet in order to jot down all the activities that would occur. As for the account titles, one can actually search the internet for them if he does not know them.
Now after the journal entries have been made, then the next thing to do would be to gather them and put them in a ledger. Now the ledger is there for the sole purpose of making sure that all the account titles will be organized. Now one will usually be creating the ledgers during the end of the month.
Once the ledger has already been created, then one now has the total amount of all the account titles. From there, one will now be able to make the trial balance to get ready for the balance sheet. Basically, one would now be tallying the numbers in the trial balance so that he will minimize his mistakes made in the balance sheet.
Now in this step, he will be making this balance sheet with a ten column worksheet. In a nutshell, he will be segregating the assets, liabilities, and all of his equity into three sections. He has to make sure that the assets would be equal to the liabilities and the equity combined.
Now after making the balance sheet, then the very next step would be creating the income statement. In the income statement, one will be listing all the income and the expenses. From there, he will subtract the expenses to the income in order to produce a net gain or loss. If the income is bigger than the expense, it is a gain but if it is the other way around, it is a loss.
Now the last statement that he will be creating would be the statement of equity which would monitor the capital accounts of the business. Now there are initially four titles here mainly the beginning capital, additional investment, withdrawals, and the ending capital. Basically, one will be adding the additional investments and subtracting the withdrawals to the beginning capital to know the ending capital.
So as one can see, there are a lot of things to think abut when handling a small enterprise. Taking care of the accounting cycle is one of the most crucial things that one would have to do. By following the cycle properly, one will be able to know whether the flow of money of the business is good or not.
Now when one would begin the cycle, he would of course begin with the journal entries as this is the recording of the day to day activities of the enterprise. Now one would have to buy a journal notebook or use a worksheet in order to jot down all the activities that would occur. As for the account titles, one can actually search the internet for them if he does not know them.
Now after the journal entries have been made, then the next thing to do would be to gather them and put them in a ledger. Now the ledger is there for the sole purpose of making sure that all the account titles will be organized. Now one will usually be creating the ledgers during the end of the month.
Once the ledger has already been created, then one now has the total amount of all the account titles. From there, one will now be able to make the trial balance to get ready for the balance sheet. Basically, one would now be tallying the numbers in the trial balance so that he will minimize his mistakes made in the balance sheet.
Now in this step, he will be making this balance sheet with a ten column worksheet. In a nutshell, he will be segregating the assets, liabilities, and all of his equity into three sections. He has to make sure that the assets would be equal to the liabilities and the equity combined.
Now after making the balance sheet, then the very next step would be creating the income statement. In the income statement, one will be listing all the income and the expenses. From there, he will subtract the expenses to the income in order to produce a net gain or loss. If the income is bigger than the expense, it is a gain but if it is the other way around, it is a loss.
Now the last statement that he will be creating would be the statement of equity which would monitor the capital accounts of the business. Now there are initially four titles here mainly the beginning capital, additional investment, withdrawals, and the ending capital. Basically, one will be adding the additional investments and subtracting the withdrawals to the beginning capital to know the ending capital.
So as one can see, there are a lot of things to think abut when handling a small enterprise. Taking care of the accounting cycle is one of the most crucial things that one would have to do. By following the cycle properly, one will be able to know whether the flow of money of the business is good or not.
About the Author:
You can get tips on how to pick a provider of small business accounting and bookkeeping services and more information about a reputable accounting firm at http://cindynoelk.com now.