Accounting is one of the most important aspects of a business simply because it is the only way one will be able to monitor the inflow and outflow of money. If one owns a small enterprise, he does not need to hire a really good accountant as he can be able to handle the numbers himself. The least that he is supposed to know would be basic small business accounting and bookkeeping.
Now the process of monitoring the money an in enterprise is known as creating the accounting cycle and begins with the process of journalizing. Now in a nutshell, journalizing is the process of recording all the activities in one notebook for the purpose of organizing them later on. The journal entries would consist of two things namely the account titles and the respective amounts.
Now after the journal entries have been made, then the next thing to do would be to gather them and put them in a ledger. Now the ledger is there for the sole purpose of making sure that all the account titles will be organized. Now one will usually be creating the ledgers during the end of the month.
Once the ledger has already been created, then one now has the total amount of all the account titles. From there, one will now be able to make the trial balance to get ready for the balance sheet. Basically, one would now be tallying the numbers in the trial balance so that he will minimize his mistakes made in the balance sheet.
Now in this step, he will be making this balance sheet with a ten column worksheet. In a nutshell, he will be segregating the assets, liabilities, and all of his equity into three sections. He has to make sure that the assets would be equal to the liabilities and the equity combined.
Now after making the balance sheet, then the very next step would be creating the income statement. In the income statement, one will be listing all the income and the expenses. From there, he will subtract the expenses to the income in order to produce a net gain or loss. If the income is bigger than the expense, it is a gain but if it is the other way around, it is a loss.
After he is done with that, then the last thing he has to create would be the statement of equity which monitors all his capital. Basically, this statement would contain the beginning capital, the additional investments, the withdrawals, and the ending capital. He will start with the beginning capital, then add the investments, and subtract the withdrawals, and the ending capital will come out.
So as one can see, there are a lot of things to think abut when handling a small enterprise. Taking care of the accounting cycle is one of the most crucial things that one would have to do. By following the cycle properly, one will be able to know whether the flow of money of the business is good or not.
Now the process of monitoring the money an in enterprise is known as creating the accounting cycle and begins with the process of journalizing. Now in a nutshell, journalizing is the process of recording all the activities in one notebook for the purpose of organizing them later on. The journal entries would consist of two things namely the account titles and the respective amounts.
Now after the journal entries have been made, then the next thing to do would be to gather them and put them in a ledger. Now the ledger is there for the sole purpose of making sure that all the account titles will be organized. Now one will usually be creating the ledgers during the end of the month.
Once the ledger has already been created, then one now has the total amount of all the account titles. From there, one will now be able to make the trial balance to get ready for the balance sheet. Basically, one would now be tallying the numbers in the trial balance so that he will minimize his mistakes made in the balance sheet.
Now in this step, he will be making this balance sheet with a ten column worksheet. In a nutshell, he will be segregating the assets, liabilities, and all of his equity into three sections. He has to make sure that the assets would be equal to the liabilities and the equity combined.
Now after making the balance sheet, then the very next step would be creating the income statement. In the income statement, one will be listing all the income and the expenses. From there, he will subtract the expenses to the income in order to produce a net gain or loss. If the income is bigger than the expense, it is a gain but if it is the other way around, it is a loss.
After he is done with that, then the last thing he has to create would be the statement of equity which monitors all his capital. Basically, this statement would contain the beginning capital, the additional investments, the withdrawals, and the ending capital. He will start with the beginning capital, then add the investments, and subtract the withdrawals, and the ending capital will come out.
So as one can see, there are a lot of things to think abut when handling a small enterprise. Taking care of the accounting cycle is one of the most crucial things that one would have to do. By following the cycle properly, one will be able to know whether the flow of money of the business is good or not.
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