Keeping the books for a small business is to record all financial transactions, the organization supporting documentation and set the stage for the start of the accounting. According to the IRS, there is no fixed rule as to how a small business must manage their accounts, when revenue and expenses are allocated. This being true, a small business can easily create a productive system for books by applying just a few of the most basic accounting procedures.
1.) Create separate all financial business transactions revenues or income from logs. To simplify the process, open a checking account records income and bank deposits in individual or batch.
Since, for the purposes of audit , each transaction must be documented, attached receipts of income, receipts and invoices to the corresponding bank deposit receipt. Expenses that can be used for tax deductions at the time, such as travel, transportation, food, lodging and some entertainment expenses are treated differently than regular purchases of office and expenses must be recorded and documented in a diary apart.
2.) Creates a separate log of all expenses. Simplify the process by issuing strict checks and a debit card designated to pay for purchases and business expenses. To provide supporting documents, keep the receipts, invoices, receipts and canceled checks corresponding bank statements.
3.) Reconciles the bank statement each month and keep a record of checks neat and orderly. Doing this is going to balance income and expenditure and automatically create perfect records on the books of every month.
4.) Record and document the costs that will be claimed as tax deductions at the end of the year. This type of expenditure; including travel expenses, transportation expenses, food, lodging and some entertainment expenses are treated differently than regular purchases and business expenses, and should be recorded and documented in a separate journal.
5.) Create a journal or book recording the information assets of the company. Assets are anything of value owned by the company including bank accounts, stock markets, stocks and bonds, certificates of deposit, investment, real estate, machinery, land, furniture and appliances. Required supporting documentation may include account numbers, dates of opening of accounts, monthly payment schedules, loan documents and utility bills.
6.) Create a diary or log book about the liabilities of the company. Liabilities are things that are owed by the company to other companies and individuals include payments to vendors, bank loans, car loans, personal loans, mortgage payments and bills. Loan documents, invoices, brochures and credit card payment includes supporting documentation.
7.) Use the information recorded on the income and expenses to prepare a monthly income statement or profit and loss. From this statement, simply deduct the total cost of the total revenues. The result will be a positive number represents a gain for the month or be a negative number representing a loss. Help prepare profit and loss statements from one year to the date, along with monthly statements to obtain a clearer picture of the company now is moving image.
8.) Use the information recorded on the assets and liabilities to formulate a balance. A balance sheet and income statement are the two financial statements that provide the most revealing information to a business. The balance usually subtracts total liabilities to total assets, leaving a figure that represents the net assets of the company or owner’s equity.