The best way to project your business is by measuring all the progress. If you don’t, it is difficult to evaluate and outline future projects. To do this, you must analyze the progress of day-to-day operations through accounting records that will allow you to leave a trace of all decisions about the financing and use of your resources.
What types of accounting books do I need to use?
A good book entry must be easy to make and understand, and certainly must be reliable, accurate, consistent, and designed to provide timely information.
From a legal point of view, accounting records must permanently and completely reflect the income and expenses of the company. There are various types of books and accounting systems, mainly the following:
* Double entry accounting. It is the one that most schools teach as a basic accounting course. Each operation is recorded in two accounts, of which one has to be charged or debited and the other paid or credited for an equivalent amount. This system is excellent; however, it requires an accounting training to understand and master it in detail.
* Computer accounting systems. There are various programs on the market. They are fast and allow you to make calculations and also generate daily financial statements on a daily basis. However, you must be cautious when choosing them and avoid falling into the temptation of buying material that is too expensive or too elaborate in relation to the real needs of the company. Most small businesses will eventually need to maintain an electronic accounting system for managing increasing inventories and / or a greater number of operations.
* Simple entry accounting (inputs and outputs). In this system, operations are recorded only once, either as income or expense, as assets or liabilities. All records are made in a journal. It is simple and easy to understand (it is, in fact, the system that is described in the example in this article).
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When starting your business
In the creation of a new company it is necessary to follow the following stages:
1. Incorporate the company before a notary public and register it with the Ministry of Finance and Public Credit. Remember that when you set up as a company, the single entry method will no longer be useful for you and you will have to use the double entry method.
2. In order to avoid confusion between personal assets and what belongs to the company, it is key to open an independent bank account for the operations of your company.
3. Choose the accounting record system to use. In the simple starting system you will need a spreadsheet with the number of columns necessary depending on the number of expense accounts. In our example we will talk about 12 column sheets. Likewise, you must send to make your invoices numbered and with the name of your company, as well as the checks, orders and all the stationery that you use.
4. Seek tax advice, so that you know what expenses are tax deductible and what their requirements are. The ideal is to contact a public accountant who will prevent you from making mistakes and will advise you on what you need.
How to make an accounting record with the simple entry system?
This is an exclusive method for individuals with business activity and legal entities that are registered with the Ministry of Finance and Public Credit under the simplified regime.
Use a notebook or spreadsheet to record the trades for the month and the monthly totals for each column. Use at least one page for each month of the year, the size of which will depend on the number of monthly transactions and will report the totals.
In the first three columns, record the date, the details of the transaction, and the check number. Try to pay all bills with a check and be sure to record all the details on the stub (purchase, date and invoice number). Also record the number and date of the check on the paid invoice. Get in the habit of making it easier for you when you have to record operations.
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Reserve the next two columns for income and expenses. Each operation must be registered in one of the columns. Income represents the amounts associated with the company’s sales, while expenses equal the payments made by the company.
The other columns are used to record the categories of income and expenses that vary from company to company. In general, you will require a sufficient number of columns to incorporate the expense items for which you most frequently write checks. If you only write one check per year for a specific expense, you don’t need to open a column for that item, you can record it in a column for “miscellaneous expenses.” In our example, the revenue is recorded in the “sales” column.
The journal entries in the example represent the income and expenses for the month of March for the company “Everything to Dive.” Since this is the second sheet of the month, start with the subtotals reported on the first sheet. The fictitious operations are the following:
1. Check No. 56 for $ 121, dated March 26, payable to Stationery X for the purchase of envelopes and paper.
2. Check No. 57 for $ 1,536 dated March 27 payable to “Diving Accessories” for the purchase of 10 diving suits for resale.
3. Check No. 58 for $ 230 dated March 27 made out to the cell phone service provider for payment of cell phone service.
4. Check No. 59 for $ 580 from March 28 to the insurance company.
5. Bank deposit of $ 5,796.94 from March 28 corresponding to invoices No. 36,37 and 38 and cash sales from March 26 to 28.
6.- Check No. 60 for $ 545 dated March 29 payable to Mauricio Sánchez to reimburse invoice No. 37 for a defective diving suit.
7. Check No. 61 for $ 26.10 dated March 26 payable to the owner of “Todo para Dive” for reimbursement of the March petty cash. (Those expenses such as parking, tickets, etc.), for which it is not necessary to write a check, must be paid by the owner who will keep the vouchers until the end of the month or until the required amount justifies the reimbursement).
8. When receiving the monthly bank statement, it is necessary to compare the checks and deposits indicated in the registry, as well as the charges made for invoice and petty cash payments. There is a difference of $ 15.80 that represents the bank charges for the month.
Once the total is established at the end of the month for each of the columns, the total Expenses must be equal to the sum of all the expense columns. The total of the Income column must be equal to the sum of all the income columns for the month. This allows you to check the accounts and make a balance and ensure, at the same time, that the amounts and entries are the same. Receipts, paid invoices and other receipts should be kept, so that they can be easily found in case of need. For example, a good idea would be to staple all the receipts for a month, put them in an envelope and sort them in chronological order. How to extend single entry accounting?
Simple entry accounting offers great flexibility, as you can keep a separate journal or sheet for expenses, income, sales, accounts receivable, and accounts payable.
With the totals that this system returns at the end of the month, you or your accountant should be able to obtain financial statements such as a “Profit and Loss Statement” or “Income Statement”.
For a good control of the company, the accounting record of operations must be carried out on a daily basis. Therefore, it is advisable to reserve a certain time for this purpose. This task can be carried out directly by you as the owner, hiring someone part-time or a third party, but it is convenient that the same person always takes care of this work. In fact, it’s best to start operations once you’ve established who will do the accounting.
It will always be an advantage to hire the services of an accountant from the beginning of business activities. He will be able to answer your questions on the subject of accounting records. If you do not know the processes, it is highly recommended that you take a course that provides you with a basis on the subject.
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Original source: Entrepreneur