Bookkeepers and accountants have common goals: to track your expenses and income and to gather the information necessary to file taxes. Most business owners do not have the inclination, knowledge or time necessary to do their own Book keeping in Yorktown. Accounting is simple, especially when the process is outlined in three steps:
1. Keeping receipts and other records of expenditures and payments
2. Summarizing expenses and income on a daily, weekly or quarterly basis
3. Using those summaries to create reports that tell you how well your business is doing and how much it is worth
Whether your accountant uses a ledger or modern accounting software, the underlying principles are the same. In this article, we will explain these three steps in detail and we will also tell you how the steps can affect the day to day operations of your business.
Keeping Records
A summary of your expenditures and income is the most important part of accounting, but this information must be documented. Records containing pertinent information, whether your accounting is done by hand or online, must back each purchase and sale. You should choose a recordkeeping system that meets your business’ needs.
Using Ledgers
A business ledger is a summary of your revenue, expenses and income entered from dated and categorized receipts. Your accountant will use this information to help you learn whether your business is turning a profit. On a regular basis you or your accountant should transfer amounts from receipts into the ledger; the frequency with which this is done will depend on how many purchases and sales you’re making.
Creating a Financial Report
The financial report is essential because it gathers all of your business’ financial information in one place. While your ledger might tell you that your business earned a lot of money during the past year, you will not know whether you made a profit until you measure your income against your expenditures. Even that step will not tell you whether your customers are paying you fast enough to ensure cash flow sufficient to pay your bills. That is why Carmines, Robbins & Company, PLC should create financial reports that combine ledger data and put it into a form that’s easy to understand.
