There are millions of small business owners and young entrepreneurs who are masters at promoting products and benefits, constructing excellent teams who know how to win over customers. Majority of these people, however, would probably fail to use or comply with the basic bookkeeping.
As a business owner you should always be updated and be aware about the types of “accounts” that your accounting services provider uses to organize your finances, because if not, all your efforts will be pointless. Seeing the whole picture of your growing business plays a great role to prevent finance discrepancies.
Here are some lists of 10 most common types of bookkeeping accounts for a small business that you need to know:
- This is the most basic component for your business. All your business proceedings pass through this account. It is a very important account that even accounting firm actually use two journals. These are Cash Receipts and Cash Disbursements which aids you in tracking the financial activities.
- Accounts receivables. Every business needs a collection team or department. This type of account is common in business who doesn’t immediately collect payment for the products and services offered to customers. Those pending payments are what you call the “receivables”, and it is very important to track down the activity.
- This account is where you stock all your business products. To keep the stability of the business, you must always keep track of the quantity and availability of your goods or merchandise. It is also very significant to check the numbers you have in hand from time to time and doing physical counts would really matter.
- Accounts Payable. It’s a financial transaction where business sends out money. It is more convenient if you have a clear sight of everything related to your Accounts Payable. Excellent bookkeeping takes its place as it assure timely payments, making sure that you don’t pay anyone more than once.
- Loans Payable. This is the amount of money you’ve borrowed to invest for items needed for your business. This is the type of account that tracks what you owe and what’s expected.
- The Sales account is where you can track the total revenue from the services or products you have provided to your customers.
- The Purchases Account is where you can see the details of transaction that you’ve had for buying merchandise or any materials for your business. Through this account you are able to calculate your “Cost of Goods Sold” (COGS).
- Payroll Expenses. Most business does have the biggest cost on this account. In general, people don’t want to work for nothing. It is very important to keep this account consistently accurate and up to date, because this is very important to meet the government reporting requirements.
- Owner’s Equity – This is the account where you can track the owner’s contribution to the business. Process may also vary on the type of ownership, some business are owned by one person and others are owned by group of partnership. Just to be fair books should be properly record every detail of the Owner’s Equity accounts.
- Retained Earnings. This is the account that tracks the profits that are invested back to the business and are not paid out back to the business owners.
It shows that bookkeeping plays a very significant roll to keep your business going. Understanding the basics would help your company grow more efficiently.