Some owners of small businesses are already experts when it comes to financial management. Some have previous experience when it comes to handling small businesses and they even have enough knowledge and deeper understanding of business accounting.
If you belong to those who are planning to start a small business or you already have a business and you want to be able to handle your finances effectively, then you must keep on reading. Moreover, this is to those with little-to-no finance experience.
Important Terms to Know When it Comes to Business Accounting:
1. Gross Revenue- This can also be called total revenue which is the sum of payments you received from your customers in return for the company’s product or service prior to deducting other expenses.
2. Expenses- this quite common sense. Expenses refer to anything that keep your gross revenue from going to straight to your pocket such as rent, supplies, payroll, taxes, and other operational expenses.
3.Net Profit– This is sometimes referred to as the bottom line, net income or net earnings. This is what’s from all the expenses and profit. You will know that you are creating profit if the net profit is positive. If it s negative they you have to take action. I know someone who experience, this, hence they look for payday loans near me.
4. Break-even Point- There will come a time where small businesses will experience temporary loss especially during the first few months of starting a business. Hence, their expenses are greater than their profit. If your expenses are just equal to the net revenue, it is called break-even
Important Documents in Business Accounting
1.Balance Sheet- this is where you can see a glimpse of your business’ financial status. You can find the assets, liabilities, and equity your company holds in the balance sheet. Basically this will make your tasks easier.
2. Income Statement- This is also referred to as the profit and loss statement and can be a summary of your business revenues and expenses all throughout the year. Moreover, income statement allows you to easily calculate how much you earned. It is crucial to maintain an accurate and consistent income statement because this will be used to determine the break even point for small and new businesses.
To someone whoa is just starting a business, he/she will find the guidelines and documents overwhelming especially preferred to handle manually. Fortunately, because of technology advancement, there are various open software available that will handle your bookkeeping.