Accounting is actually a key business function no matter what the size and nature of the business. By having accounting books and records properly maintained, a business will be able to determine the amount of profit it made in the past as well as the present financial health of the business. The accounting books have to be correct and they must not be based on assumptions or influenced by bias. Here?s a quick look at important small business accounting practices.
Accounts receivable is the account of all of the cash that is currently owed to the company by its debtors. There are many buyers who don?t make immediate payments on their purchases and promise to pay the amount due at a certain future date. These types of buyers are known as debtors. At the time of purchase, the seller prints an invoice and gives the customer a statement indicating the total amount of money owed by the buyer. The seller should keep an eye on the total amount owed as well as the time permitted for payment. If the buyer goes beyond the specified period of time, then the seller needs to initiate some kind of action.
Accounts payable is the opposite of accounts receivable and it is all money that is to be paid by the company to its creditors or lenders. The rent on the building, loans, taxes, wages, all belong to the accounts payable account. There are some vendors who offer discounts to customers when they make the payment on time or prior to the specified date. A business needs to pay attention to its accounts payable to make sure that it can make full use of the discounts as well as keep an eye on just how much money goes out of the business and at what point of time.
Order entry is an extension of the accounts payable and accounts receivable. When a company makes the payment it owes, or when it receives the cash it?s owed, then the company would have to make an entry in its book of records. As always, the accountant should make sure of accuracy when making these entries.
Inventory control is an additional facet of small business accounting and it is one of the most important factors. With appropriate inventory management, a company would not have to deal with situations where it has to forgo buyers because of unavailability of stock. The company would in addition be able to find out just how much money it has tied up in its inventory in the form of goods.
To make certain the company operates efficiently, ordering inventory on time is critical. Payroll maintenance, cost accounting, and management accounting are some of the other elements associated with small business accounting. Properly maintained accounts will help with the growth and efficient functioning of the business.
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Tags: accounting, business, small business, small business accounting
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