Small Business Accounting

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Following Outgoing Cash with the Cash Disbursements Journal

The Cash Disbursements journal is the first place you record cash that goes out of the business and used to pay bills, salaries, rents, and other necessities. The Cash Disbursements journal is the point [more…]

Using a Sales Journal to Record Non-Cash Transactions

The Sales journal is where you initially record transactions for sales made by store credit (non-cash transactions). Each entry in the Sales journal must indicate the customer’s name, the invoice number [more…]

How Bookkeepers Track Purchases with the Purchases Journal

Purchases of products to be sold to customers at a later date are a key type of non-cash transaction, recorded in a business bookkeeper’s Purchases journal. All businesses must have something to sell, [more…]

Preparing a General Journal for Miscellaneous Transactions

Bookkeepers can prepare a general journal for miscellaneous transactions that don’t fit in one of the four main journals for a business (Cash Receipts, Cash Disbursements, Sales, and Purchases). If you [more…]

Bookkeeping: Posting Journal Information to the Appropriate Accounts

When bookkeepers close their books at the end of the month, they summarize all the journals — that is, they total the columns and post the information to update all the accounts involved. [more…]

Simplifying Journaling with Computerized Accounting

If you’re working with a computerized accounting software package, you enter a transaction only once, which greatly simplifies your bookkeeping journaling. All the detail that normally needs to be entered [more…]

Padding Profits by Manufacturing Too Many Products

Whenever production output for a business is higher than sales volume, be on guard. Excessive production can inflate the profit figure. Until a product is sold, the product cost goes in the inventory asset [more…]

Protecting Checking, Savings, and Petty Cash Business Accounts

Protect your business's checking, savings, and petty cash accounts. Cash used in a business is vulnerable; "dipping" into the checking, savings, and petty cash accounts can be tempting for some employees [more…]

How to Record Expenses and Losses for a Business

To make a profit, business managers have to control expenses. This task requires a good deal of information about how to record expenses and losses. How many expense accounts should a business maintain [more…]

Entering the Initial Inventory Costs for a Business

When your business first receives inventory, you enter the initial cost of that inventory into the bookkeeping system based on the shipment’s invoice. Invoices are sometimes sent separately, and only a [more…]

Controlling Inventory and Supplies Billing in Your Business

Eventually, you have to pay for both the inventory and the supplies you purchase for your business. These bills are typically posted to Accounts Payable when they arrive, and they’re paid when due. A large [more…]

Tracking and Recording Cash Sales in a Bookkeeping System

Most businesses collect cash as payment for the goods or services they sell. These cash sales must be tracked and recorded in a bookkeeping system. Cash receipts include more than just bills and coins; [more…]

How to Balance Cash Register Transactions

A business must balance cash register transactions at the end of each day to properly track and record sales transactions. This also helps to ensure that cashiers don’t pocket a business’s cash — cashiers [more…]

How to Maintain Employee Records

Keeping employee records accurate and up to date is essential for your business, especially when considering all the state and federal filing requirements for employee taxes. Otherwise, you’ll have a hard [more…]

Basic Types of Business Manufacturing Costs

Businesses that manufacture products have several additional cost factors to consider compared with retailers and distributors. These types of manufacturing costs include raw materials, direct labor, variable [more…]

How to Classify Product Costs for a Manufacturer

Two issues exist when businesses classify product costs for a manufacturer. They must distinguish between manufacturing and non-manufacturing operating costs, and determine how to allocate indirect costs [more…]

How to Calculate Product Costs for a Manufacturer

Businesses that manufacture products must determine how to calculate their product costs. Because most businesses produce multiple products, their accounting systems must be very complex and detailed to [more…]

Examining Fixed Manufacturing Costs and Production Capacity

Product cost consists of two distinct components: fixed manufacturing costs and variable manufacturing costs. The production capacity refers to the people and physical resources needed to manufacture products [more…]

Recording Store Credit Transactions in a Bookkeeping System

When sales are made on store credit, you must record specific information into the accounting system. In addition to entering information regarding cash receipts, you update the customer accounts to be [more…]

Things to Remember about Budget Analysis

A budget truly gives a business owner or manager a way to plan out the year's operation, think about what's most important, and quantify what the firm should achieve over the year. While formulating your [more…]

Understanding Activity Ratios in Bookkeeping

Activity ratios provide an indication of how efficiently a firm runs its operations. For example, all other factors being equal, a firm that keeps a very modest amount of inventory is in better shape than [more…]

Understanding Profitability Ratios in Bookkeeping

The profitability ratios analyze a firm's profitability. In a sense, these profitability ratios are the most important ratios that you can calculate. They typically provide terribly useful insights into [more…]

Understanding Traditional Overhead Allocation on an Income Statement

The problem in many businesses using traditional overhead allocation is that their overhead expenses or operating expenses don't cleanly tie to products or services. Without good allocation of overhead [more…]

Understanding Activity-Based Costing

To create an activity-based costing (ABC) product line income statement, you attempt to trace the overhead cost directly to products or services. For example, suppose that in the case of an imaginary hot [more…]

Should You Use Activity-Based Costing in a Small Business?

Activity-based costing (ABC) lets you better allocate overhead costs and, as an added bonus, also often gives you unique insights into what "drives" your overhead costs. With this information in hand, [more…]

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