Small Business Accounting

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How to Implement a Simple Activity-Based Costing System

Activity-based costing (ABC) systems don't have to be that complicated, particularly if you just want better allocation of your overhead costs rather than a system to look at the cost drivers or the activities [more…]

Understanding Liquidity Ratios in Bookkeeping

Liquidity ratios measure how easily and comfortably a firm can pay its immediate financial obligations and exploit immediate short-term financial opportunities. For example, everything else being equal [more…]

Understanding Leverage Ratios in Bookkeeping

Leverage ratios measure how much debt a firm carries and how easily a firm pays the interest expenses of carrying that debt. Leverage ratios are important for an obvious reason. Typically, a firm mostly [more…]

Understanding Economic Value Added in Business

Economic Value Added (EVA) analysis measures how profitable it truly is to run a business instead of selling it. It states in a formula something you already know in your gut: If you're a business owner [more…]

How to Use Economic Value Added When Your Business Has Debt

In very large businesses, economic value added (EVA) analysis gets really computationally burdensome. Although there are multiple potential problems, you should be familiar with one common complication [more…]

3 Steps for Calculating Rate of Return on Capital Expenditure

Capital budgeting boils down to the idea that you should look at capital investments (machinery, vehicles, real estate, entire businesses, yard art, and so on) just as you look at the CDs [more…]

Thinking about Risk with Capital Investments

Risk is an issue even with simple investments like bank CDs. But with capital investments, no government agency is looking out for your interest and picking up the pieces if things do a Humpty Dumpty and [more…]

How Profit-Volume-Cost Analysis Works

Profit-volume-cost analysis is a powerful tool that estimates how a business's profits change as the sales volumes change as well as breakeven points. [more…]

Calculate Breakeven Points in Your Business

Profit-volume-cost analysis is a powerful tool that estimates how a business's profits change as the sales volumes change. It can also help estimate the breakeven point. A [more…]

Finding Market Equilibrium Price and Quantity

Buyers and sellers interact in markets. Market equilibrium occurs when the desires of buyers and sellers align exactly so that neither group has reason to change its behavior. The market equilibrium price [more…]

Identifying Market Failures

Sometimes markets fail to generate the socially optimal output level of goods and services. Several prerequisites must be fulfilled before perfect competition can work properly and generate that output [more…]

How to Calculate Payroll for Employees at Your Business

When you know the details about your employees’ withholding allowances and their benefit costs, you can then calculate the final payroll for your business and post it to the books. [more…]

Bookkeeping: How to Track Sales Discounts

When your business offers discounts to customers, a good bookkeeping tactic is to track the sales discounts in a separate account so you can keep an eye on how much you discount sales in each month. [more…]

Recording Sales Returns and Allowances for Your Business

Bookkeeping can become pretty confusing if you incorrectly record sales returns, gift card sales, and returns bought with a discount. Most stores deal with sales returns and sales allowances [more…]

Monitoring Accounts Receivable and Recording Business Losses

It’s important for businesses to closely monitor Accounts Receivable to minimize the recording of business losses. One of the bookkeeper's crucial responsibilities is to make sure customers pay their bills [more…]

Deciding How Frequently to Pay Your Business’s Employees

Deciding how frequently you’ll pay employees is an important point to work out before hiring staff. Most businesses choose one or more of these pay periods: [more…]

Determining Net Pay for Employees in Your Business

Net pay is the amount a person is paid after subtracting taxes and benefits. So, after all deductions are subtracted from an employee’s gross pay, you are left with the net pay. After you figure out all [more…]

Cafeteria Benefits Plans: Offering Choices to Employees

Cafeteria plans are benefit plans that offer employees a choice of benefits based on cost. Employees can pick and choose from those benefits and put together a benefit package that works best for them [more…]

Classes of Stock Shares in a Business

Before you invest in stock shares, you should ascertain whether the corporation has issued just one class of stock shares. A class is one group, or type, of stock shares all having identical rights; every [more…]

Why Accounting Systems Need Strong Internal Controls

Any accounting system should establish and vigorously enforce effective internal controls — basically, additional forms and procedures over and above what’s needed strictly to move operations along. [more…]

Accounting Controls That Guard Against Mistakes and Theft

Accounting is characterized by a lot of paperwork — forms and procedures are plentiful. Internal accounting controls that guard against mistakes and theft are also essential business tools. Most business [more…]

Leaving Good Audit Trails in a Bookkeeping System

Good bookkeeping systems leave good audit trails. An audit trail is a clear-cut path of the sequence of events leading up to an entry in the accounts. An accountant starts with the source documents and [more…]

What You Should Know about Financing a Business

To run a business, you need financial backing, otherwise known as capital. A business raises capital by buying things on credit, waiting to pay some expenses, borrowing money, getting owners to invest [more…]

Financial Leverage: Taking a Chance on Business Debt

A majority of businesses use financial leverage to borrow money, providing part of the total capital needed for their assets. The main reason for debt is to close the gap between how much capital the owners [more…]

Studying the Sources of Business Capital

Every business needs sources of capital (financial backing), because it's capital that provides the money for the assets a business needs to carry on its operations. Common examples of business assets [more…]

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