Every small businessman should learn the bookkeeping basics. Whether you are selling goods on your small shop or providing small service to your customers, this knowledge will help you to promote your small business. When you will learn it, you are also developing your accounting skills and when your business will grow, you can provide free accountant's service to your own business.
1. Learn Double Entry System
When you start your business with your own capital, it is the first transaction which is done between you and your business. You have to set up double entry system in your business. Now start to record every transaction from beginning to end with same system. As per this system, two accounts will be affected with every single transaction. One account will be debit and other account will be credit. Every account is classified in asset, liabilities, income and expense. Increase in asset or decrease in liability or decrease in income or increase in expense account will be debit. Decrease in asset or increase in liability or increase in incomes or decrease in expenses account will be credit. More hand on learning journal entries with examples will help you whole double entry system.
2. Learn Cash or Accrual System
If your all most all the transactions in cash, you need to record these transactions by adopting cash system of bookkeeping. As per this system, we need not record payable expense and receivable incomes. When incomes will receive in cash or expenses will pay in cash, journal entries will be passed.
On the other hand, if you buy goods on credit and sell goods on credit, you need to adopt accrual system of bookkeeping. As per this system, you need to record all the expenses which are due but not paid and all the incomes which are earned but not received. Learn more through finding difference between both systems.
3. Learn Accounting Equation
Sometime, expert says accounting equation as mini balance sheet because balance sheet of any organisation is made on the principle of accounting equation. You should learn it and know, how will accounting equation same in all business transactions.
Assets = Outside Liabilities + Capital
If you started business with $ 10000, it means, you have $ 10000 cash asset in the business and capital of $ 10000. So, both sides are equal. So, you have to try to equal all business transactions in accounting equation by following its principles.
4. Learn Accounting Terms
It is also part of bookkeeping basics. As good learner, you should learn all the accounting terms. You can find it in our Accounting Dictionary Project.
1. Learn Double Entry System
When you start your business with your own capital, it is the first transaction which is done between you and your business. You have to set up double entry system in your business. Now start to record every transaction from beginning to end with same system. As per this system, two accounts will be affected with every single transaction. One account will be debit and other account will be credit. Every account is classified in asset, liabilities, income and expense. Increase in asset or decrease in liability or decrease in income or increase in expense account will be debit. Decrease in asset or increase in liability or increase in incomes or decrease in expenses account will be credit. More hand on learning journal entries with examples will help you whole double entry system.
2. Learn Cash or Accrual System
If your all most all the transactions in cash, you need to record these transactions by adopting cash system of bookkeeping. As per this system, we need not record payable expense and receivable incomes. When incomes will receive in cash or expenses will pay in cash, journal entries will be passed.
On the other hand, if you buy goods on credit and sell goods on credit, you need to adopt accrual system of bookkeeping. As per this system, you need to record all the expenses which are due but not paid and all the incomes which are earned but not received. Learn more through finding difference between both systems.
3. Learn Accounting Equation
Sometime, expert says accounting equation as mini balance sheet because balance sheet of any organisation is made on the principle of accounting equation. You should learn it and know, how will accounting equation same in all business transactions.
Assets = Outside Liabilities + Capital
If you started business with $ 10000, it means, you have $ 10000 cash asset in the business and capital of $ 10000. So, both sides are equal. So, you have to try to equal all business transactions in accounting equation by following its principles.
4. Learn Accounting Terms
It is also part of bookkeeping basics. As good learner, you should learn all the accounting terms. You can find it in our Accounting Dictionary Project.
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