Small Business Book Keeping Basics: Accounting Basics for the Entrepreneur - Accountants Leeds
Skip to main content
 

Small Business Book Keeping Basics: Accounting Basics for the Entrepreneur - Accountants Leeds

If you want to do your own bookkeeping and accounting, here are some basic guidelines.

So you want to do your own bookkeeping and accounting. Well, this is one of the most frustrating issues for many managers and small business owners. If you have no background in this, then it can be incredibly difficult and frustrating. It is not as simple as balancing your cheque book. And a lot of people have problems with that! Here is some basic information to get started.

Accounting / Bookkeeping Programs

In accounting you have to understand the requirements on account classification. If you have an outside accountant, then that person can usually show you what accounts you need for your business. Many small business owners use packages like Sage in order to track their business books. This is great. But it still requires an understanding of basic bookkeeping. These programs will ask you start up questions that lead into the types of accounts that are likely needed for your business. But, honestly, they tend to be more cumbersome than what you really need. That is why it is always good to have an outside expert that you can ask for a little advice, if you are not going toke the recommended route and to hire someone on a regular basis.

Common Accounts that a Small Business Needs

All companies require a Revenue account. It is rare to need more than one.

Most companies require a sales tax account. It may make it easier to have one for tax inputs (your credits, where you pay taxes) and your taxes collected (the amounts that you have collected on your sales.

Then there are your expense accounts. These are the items that you spend money in order to run your business.

Basic Expense Accounts

Most businesses need to track the following expense accounts:

  • Payroll – this may include sub-accounts for a variety of deductions or additional expenses (wcb, insurance, etc) that are part of your payroll
  • Cost of goods sold – if you are a retailer, this is the cost of the items you bought for resale. If you are a manufacturer, this is the final cost of items that you completed making and sold to your clients (wholesale or retail)
  • Office expenses – paper, pens, ink, postage, etc
  • Telephone
  • Rent
  • Bank Fees
  • Utilities
  • Insurance
  • Advertising
  • Automobile

Many businesses have nothing more than this. If your business is more complex, you might have items such as materials (if you manufacture something, including construction businesses), supplies (products consumed in making your items for sale, but that are not part of those items – in construction this includes such things as cleaning supplies for the sites, for other businesses this is often included in office supplies), security (alarm systems, etc.), interest expense, amortization, meals & entertainment, training, travel, storage, and more. Always consult with an expert if you are not sure.

Liability Accounts

Of course, most businesses also have liabilities. These are the accounts payable to their suppliers and other creditors. Whenever a liability is entered, be sure to enter the opposing side of the entry to show where the money went (such as when a bill is entered, the one side of the entry is to accounts payable, and the other side is to the cost of whatever was bought). If you are entering loans, be sure to enter the bank account entry and the opposing entry against/to the loan. If you have any problems with this, consult your expert.