If you are thinking about setting up a business, you first need to focus on setting up the accounts and even maintaining them. Although sometimes it might get a little intimidating, we know that there are easy ways in which you can ace the process. Bookkeeping or maintaining tabs is indeed an important domain.
As you might have understood from the title, we will discuss why it is so important for small businesses. Why so? This is primarily because they do not tend to have much money, so management is also crucial. Today we will be talking about 10 easy examples for bookkeeping.
What Are The Ten Easy Ways of Bookkeeping?
We can say that bookkeeping is indeed very important; however, there are different ways in which you can ace it. Today we will discuss the 10 most easy examples in this domain that are great for small businesses.
1. Accounts Payable
When talking about maintaining the tabs of a particular business, we know that nobody likes to give away money. However, it is very important to ensure that you have complete knowledge of the payable accounts. What does that mean?
Accounts payable (AP) is the sum your business owes to suppliers or vendors for goods or services received but not yet paid for. It essentially means the amount you will need to pay in due course. When you deal with many products in one go, there is always some money you can pay up later. This is the accounts payable, and the exact amount has to be maintained for a better idea.
The total outstanding amount your business owes to the vendors or service providers is shown under the accounts payable column in the company’s balance sheet.
2. Accounts Receivable:
The next example of bookkeeping that we are going to talk about is the accounts receivable. As you might have assumed by now, this is the opposite of the accounts payable. This amount refers to the money that you will be getting from your vendors or your clients who have purchased products or services from your company.
It often happens that when clients purchase products or services in bulk, the payment is made in part. The credit period usually ranges from a few days to a month. In some cases, the credit period is even longer, like a few months or a year.
Accounts receivable means the payment has not yet been realized. This implies that the business has given a credit limit to its clients. Typically, a business offers both cash and credit when selling its products and/or services to its clients. The outstanding amount yet to be received by you is referred to as the accounts payable.
Now we have to talk about inventory which is probably the most important example of bookkeeping services for small businesses. This refers to the entire material your company has as a stock. We know that businesses source many products at one go and then store them for eventual usage.
However, that is the amount that you need to keep a tab about as well. This will give you a fair idea about how much the money has been blocked with the product stock that you have deposited.
There are two different ways you can keep track of your inventory. Either on a regular basis, such as every day, every month, every year, or you may choose to rack your inventory at any other time that works for your business the most. Choose either way that is simpler for you, or do it right after you make a sale.
The next example of bookkeeping which is quite straightforward yet very crucial is sales. The ultimate aim behind opening any business is to ensure you can get a lot of sales. Hence maintenance of that tab is essential as well. It will help you know how many of the products have been sold.
When you are Bookkeeping, the vertical of sales gives you a clear idea of what the revenues are. This is also indeed very important and has to be focused on so that you can understand how much you have been able to make an impact.
Make sure you accurately and promptly record your sales as a part of bookkeeping services to know where your firm stands. You should be aware of all kinds of accounts you must maintain when you begin bookkeeping for your small business.
5. Payroll Expense:
A business does not mean that it comprises only you. Hence when we talk about bookkeeping, maintaining the payroll expenses is equally important. This will give you a very good idea about how much money is required for maintaining the employee force of your business.
If you want to maintain a solid record of all the financial transactions in your company, you need to enter all payroll transactions into your records for payroll accounting. Payroll journal entries are used by business owners to record payroll costs in their books. The general ledger includes payroll journal entries, which are categorized under the payroll account.
Payroll costs could be the biggest expense a business has, particularly if it operates in the service sector where staffing levels, you may need a small number of employees to support a substantial quantity of capacity for earning income.
6. Purchase or Expenditure:
As a business, you need to purchase many things so that the business moves on smoothly. Hence having a detailed record of all the purchases or expenses you make is a good idea an is also very important, and bookkeeping allows you to do that.
When you maintain a book for the purchases or expenditures, you can understand exactly how small or a large sum is being spent on raw materials as well as other important requirements. Make sure you know about the purchases and keep the bills for record.
You should also check the purchasing account when doing your books. This is where you keep track of any finished goods or raw materials you purchase for your company. It plays a significant role in figuring out the cost of products sold, which you deduct from the sales account to determine your company’s gross profit.
7. Payable Loans:
There are a lot of businesses that are formed after they have taken an amount of loan from the bank or other options. Hence once you have set up your business and it is running, it is very important to maintain tabs for the amount of loan payable.
Some companies tend to go for a monthly EMI scheme to pay off the loan amount. So when you are maintaining your company books, do not forget to add this expense. Maintaining accurate company books will allow you to know how much you owe the bank and for how long you will need to keep making the payment to clear off your loan.
Loans payable, unlike accounts payable, is an accrued interest that must be paid. Accounts payable are owed for products or services, and you take on the obligation in exchange for a cash loan.
8. Earnings Retained:
Finally, one of the most important examples, which is quite entertaining for the business owners as well, is the earnings retained. The earnings retained gives you a very clear idea of what is the amount of money that your business is left with after you have deducted all the other factors.
The earnings retained will help you analyze your profit, and eventually, you need to reinvest it as well for the growth of your business. The earnings retained example of bookkeeping is indeed very important and probably the most important one.
We can say that a business cannot run well only with bank-based transactions. You have to make sure that to run a business successfully, you must depend on a bit of cash. The tab of bookkeeping ensures that you can keep a record of the total cash which has been withdrawn or even spent.
Maintaining books for cash is also very simple, and all you need to do is be a little bit aware. However, try to maintain the books for cash regularly; otherwise, you are going to get confused or can even forget some of them.
10. Equity of the Owner:
Lastly, it is also very important that when we are talking about examples for bookkeeping, we mention the owner’s equity as well. Are you wondering what this means? No matter what business you are concerned about when it comes to bookkeeping, each business starts with a small amount which is known as the equity from the owner.
For many businesses, the owner puts in their money single-handedly, while others run with partners. Hence it is very important to make sure that you have a complete tab of what is the amount that the owner of the owners has started the business with. This factor will help you understand the progress of your business.
No matter what kind of business you have, be it large, small, or even just at its initial stage, connect with Profit Jets today and let us manage your company finances perfectly with accurate bookkeeping services.
Many business owners struggle with maintaining company books, and it leads to a lot of confusion with its accounts and finance. The 10 examples that we have mentioned for easy bookkeeping will come in very handy if you have a small business and can even use the same for large-scale businesses.
Get in touch with the professionals of Profit Jets today and discuss your company requirements. We will offer the best solution at an affordable rate.