Starting Your Own Business by Ron Immink

Author:Ron Immink
Language: eng
Format: epub
Publisher: Oak Tree Press

ACCOUNTING

OBJECTIVES

o Understand the basics of bookkeeping

o Appreciate the need for records and regular accounts

Accounting – anything to do with financial matters – is the part of being in business that most small business owners like least. So they often neglect it, saying that it is more important to be “out there selling”. Or they hand over responsibility for it to someone else – and forget about it. But you wouldn’t do that with any other part of your business. You wouldn’t hand over responsibility for marketing, for product development or for recruiting staff to anyone else. Why do it for something as critical to your business as accounting?

Accounting consists of three steps:

• Recording transactions

• Analysing them so that they provide information

• Interpreting them so that they are useful for decision-making.

Recording transactions

Let’s start with a very simple paper-based system.

First, identify what transactions you need to record. Most businesses have:

• Purchases on credit

• Sales for credit

• Receipts – cash into the bank account

• Payments – cash out of the bank account

• Petty cash.

Let’s start with these. For each transaction, you need to record:

• The date

• The type of transaction

• The other person involved

• The amount involved.

If you use a separate page for each type of transaction, you do not need to record the type of transaction – the page it is recorded on will tell you what type it is.

So you now have five pages for each of the transaction types with a limited amount of information recorded on each – the next chapter, GO!, shows examples of each of these.

A Tradesman’s Books, like a Christian’s Conscience, should always be kept clean and clear; and he that is not careful of both will give but a sad account of himself either to God or Man.

DANIEL DEFOE (1660-1731)

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