Author remarks: Earlier one of my article” The subsequent top accounts you should monitor on a regular basis” I have articulated that which kinds of accounts in the business you should monitor regular basis because all accounts are not created equally. Some accounts are more critical than others. So that you should this critical accounts monitor regularly, otherwise if any problem arise in these critical accounts you cannot measure or report to management of business financial positions accurately
Now, through this article” The top problems of accounts you should practice regular basis.” I have also explained that which accounts you should practice regular this is also critical & importance than others. I believe the learners & readers who related with accounting profession he/she would helpful as of this article.
Introduction: this is true that understanding of accounting does not come easily because it engages a talented combination of technical knowledge and measurement creativity that only comes with determination and hard work, but if you keep trying you will be surprised at what you find out about accounting. Knowledge of accounting is very valuable to business success if you conquer this you will understand that the accounting is actually quite an interesting division, take the time to be certain to understand accounting concept by practice. Which problems you should practice regularly following is clarify those elements
01. Identifying Accounts and Using Double-Entry Bookkeeping
You will find as a bookkeeper it is essential to enter transactions into the correct accounts. You may not be a financial professional and you may not be looking forward to dealing with the accounting side of the business. However, businesses have to keep a detailed accounting of their financial transactions. This process is known as bookkeeping. The survival of the business depends on the owner’s ability to establish good accounting and bookkeeping practices.
Most businesses, even most small businesses, use double-entry bookkeeping for their accounting needs. Two characteristics of double-entry bookkeeping are that each account has two columns and that each transaction is located in two accounts. Two entries are made for each transaction a debit in one account and a credit in another account. If you want to keep track of asset and liability accounts, you want to use double-entry bookkeeping instead of single-entry. Other advantages that double-entry bookkeeping has over single-entry bookkeeping are that the owner can accurately calculate profit and loss in complex organizations, financial statements can be prepared directly from the books, and errors or fraud are easy to detect.
In additional- you would enter a debit to cash to your checking account. Next, you would enter a credit to the Sales and Sales Tax Collected accounts. The entries on the debit side and credit side should always balance. The entry into your sales journal would use three figures — the subtotal of sales, total sales, and sales tax.
02. Keeping Journals
Every financial transaction for your business will need to be entered into journals. The source document is essential to the bookkeeping and accounting process. It is the evidence that a financial transaction occurred. If a company is audited, source documents back up the accounting journals and general ledger as an indisputable audit trail.
Keeping a source document for a business is just like keeping your receipts for tax-deductible items for your personal taxes. You have to have those receipts in case your taxes are audited. The same is true for your business, but you don’t just keep receipts for tax deductible expenses. You keep receipts (source documents) for every financial transaction.
A source document describes all the basic facts of the transaction such as the amount of the transaction, to which the transaction was made, the purpose of the transaction, and the date of the transaction.
03. Paying Bills and Managing Inventory
Most small businesses do not have a separate mailroom. Large businesses, on the other hand, will have an entire department dedicated to inter-office and external mail. Based upon the estimated number of pieces mailed per month, here is a guide to help you decide what type of mailing equipment you need.
If you don’t pay your creditors, vendors, and anyone else to whom your company owes money, you won’t be in business for long. Customers will be impacted if you do not apply enough postage because the piece will be returned to you for the proper postage and this will keep your customer waiting. You also need to keep track of what you sell, how many products you have on hand, and know how to value that inventory. You can better manage your company’s outgoing cash and inventory.
04. Tracking Sales
Keeping track of money coming into the company is the fun part. Financial forecasting for the future is not easy. it has become much more difficult because the economic environment has become much more volatile. However, the basics of financial forecasting remain the same. Small business owners must develop the talent to plan ahead. It is one of their essential talents if they want their business to succeed. It is important for the small business person to realize that profit is not the only important variable. A comprehensive financing plan for the future must be developed in order for a small business to succeed.
In order to do a good job of financial forecasting for the small business firm, the owner should develop a comprehensive set of projected financial statements. These projected financial statements, called pro forma financial statements, help forecast future levels of balance sheet accounts as well as profits and anticipated borrowing. These pro forma financial statements are the small business owner’s financial plan.
05. Testing Your Balance
After you’ve entered all you company’s dealings you require to be certain the books are in balance If they aren’t, the financial statements you produce based on the data collected will be useless. And as any company’s lenders, vendors, and owners want to know if the company finances are in balance, you need to also know how to organize a Balance Sheet
06. Reporting Income
Every business owner loves to see how much money he made. All income is presumed to be taxable, that income is taxed in a variety of ways. Wages for example are subject to several different types of tax rates. Dividends and capital gains may be taxed at a lower rate, and some income might be partially taxable or even non-taxable. You make this possible by pulling together the accounts related to income and expenses and preparing an Income Statement
07. Closing the Books and Starting Over
At the end of every accounting cycle you need to close out the books and prepare financial statements every business, regardless of size, has to keep a detailed record of its financial activities in order to comply with the tax laws. The activity of making and maintaining these records is known as bookkeeping. For small businesses, accurate and diligent bookkeeping is necessary. So where do you start? Here are a few basics to keep in mind when setting up a bookkeeping system. Follow this advice, and the numbers will work for you, rather than the other way around. The sprite of bookkeeping is in the details. Approach these details with a keen focus and you’re bookkeeping will reveal crucial information about your business’s health and vitality. Attention to financial details pays off, in both the short and long terms. And after closing out the books, you then have to get ready for the next bookkeeping year. You can practice the key steps of preparing for the next year.