For every business, it’s vital to maintain record books. However, the books could be of many types like books, journals, or bookkeeping. But the real thing is to learn how to maintain the record properly. Basic accounting is a crucial skill necessary to perform to run a successful and sustained business. You have an option of doing all the work on your own, or you can hire a professional for the job. Still, it will help a lot if you know basic accounting terms on your own, as it’s best to keep a check on record keeping. So, if you are one of those who want to get familiar with accounting, then we take a start from here:
What is accounting?
Accounting is a process of maintaining all records systematically. But before recording anything, it’s vital to assess, analyze and then record the transactions. We use different formats to keep track of records. Many companies use professionals who help them track profit, losses, expenses, and income. These experts are also responsible for making financial plans and preparing budgets. So, if you require technical help, it’s better to hire someone expert in this field. But if the job is of basic level, you can do that with little knowledge. For instance, if the business is small, you need to hire a team to get assistance.
Departments that require accounting:
Accounting is becoming an essential thing in all fields of life. But some departments are required by law to maintain accounting records. For instance, according to 6F of the income tax act, there are the following professions that should keep accounting records:
|Film artists||Interior decoration||Engineering|
|Architectural||Technical consultation||And some other departments|
However, all these professions are required by law to maintain the ledger, journals, and cash books. But if you want to maintain everything on your own, try to learn the basics.
Types of accounting:
We mainly see two different sides of accounting; one is cash, and the other is accrual. You can adopt any form, and it entirely depends on the business nature. But the primary difference comes down to timing. Apart from this, there are other types of accounting:
Apart from this, there are types that we mentioned earlier, like cost and credit accounting. However, all these types are used for different purposes. So, you can use any of the above that goes best with your business nature.
Basics of accounting:
If you want to understand the basics of accounting, then at first, you will have to look at the main components. So, the main areas are:
- Financial statements
These are the main components, and then we further divide them into other parts. In short, we can divide these into the following different sub-categories.
The income statement is of utmost importance that shows the company’s profitability and loss. In short, it tells how much you have earned and spent on assets and what are your cash expenses. Apart from this, the statement tells about all the business liabilities.
The balance sheet is another crucial document that tells the financial standing of any business. In simple terms, it tells us about a company’s retained earnings, whether it’s small or large. Moreover, it tells us about assets and liabilities to know whether both sides are equal or not.
Profit & loss statement:
Another statement provides a glimpse of income and expenses during a specific period. For instance, you can make a statement quarterly, monthly, or yearly. However, this document reflects the schedule of the tax document.
Note: Apart from this, there are other mandatory statements like bank reconciliation and cash flow statements. The main aim is to analyze operating, financing, and investing activities.
Other basics of accounting:
Apart from the above documents, some terms are crucial to know to go further. So, here are popular terms in accounting:
|Account payable||The account records businesses’ payments to the vendors, creditors, and other suppliers.|
|Account receivable||It’s the record we use to maintain money that we will receive from suppliers, vendors, and suppliers.|
|Accounting period||The time in which you decide to maintain a record and prepare financial statements|
|Accruals||These are income and expenses that are liable to pay but have not occurred yet.|
|Assets||These are long-term resources like building, equipment, and machines, etc.|
|Capital||It is money that you have in business to bear functional costs|
|Debit||Debit is the opposite of credit, and we record these on the left side of accounting books.|
|Fixed costs||These costs remain unchanged, like building rent, fixed wages, etc.|
If we take a bird’s eye view, accounting doesn’t look like a glamorous career option. But by looking deep down, there are many fields that you can adopt to make a career. Accounting is a vast thing used in all walks of life, whether you use a paystub maker or file tax forms. So, it’s better to take a deep dive into this field and know the basics.
Critical skills to become a good accountant:
If you want to become a good accountant, a few skills should be there. So, here are top skills to possess:
- It would help if you were innovative enough to figure out tools that could provide tight control over activities.
- It will help if you adopt the habit of understanding things at first glance.
- Make your communication skills better
- You should be well aware commercially
- It’s vital to be enthusiastic enough to understand even inflexible terms
- It will help if you don’t compromise on the credibility of accounting tools
Apart from this, you need to develop personal skills like stability and be consistent related to your goals. If you have work experience and relevant high-income skills, no one can stop you from becoming a good accountant.
After reading the complete guide, it’s evident that every incredible journey starts with a roadmap. So, if you are planning your company’s growth, you should set goals. If you do all this, then you can enjoy the following benefits:
- It helps to grow your business
- Perfect for securing loans
- Accounting helps to attract investors to sell businesses and products
- You can make it as a proper career
- Help you to stay on top of the record-keeping game
- You can pay the correct taxes on time by maintaining everything rightfully
If you implement everything in the right direction, you can grow your business. But you can always seek professional advice if there is anything unclear.