Sometimes bookkeeping, accounting, payroll and tax preparation services are all offered under the same roof. In some cases, one area depends on the other.
Basic Bookkeeping Principles – Did you know the revenue from the accounting, tax preparation and payroll services industry in the United States is forecasted to generate around 160 billion U.S. dollars by 2018? Bookkeeping involves the recording of financial transactions, while accounting leverages that information to produce financial models for a company. With good accounting, a company can better understand their profitability and cashflow.
Since mainstream conversations tend to interchange accounting and bookkeeping terminology, Your Miami Beach Bookkeeping Department is here to share some basic accounting and basic bookkeeping principles and comprehensive glossary.
Journal Entries: One of the most basic bookkeeping principles, journal entries are used for tracking business expenses and income that’s received. Proper journal entries can help you keep your books balanced and also makes financial reports easier to create. A journal entry consists of the date, amounts debited or credited, short description and a reference such as a check number. Journal entries can also include depreciation or accrued interest.
Accounts Payable: This is the money you owe to your vendors and creditors. For example, if you bought a new printer for your small business marketing firm, that payment is recorded in your accounts payable. These are marked as liabilities. Other examples include advertising, travel and utilities.
Accounts Receivable: This is the money you expect your clients or customers to pay you for the products you sold to them or services you offered. For example, if you sold photography sessions to a newlywed couple, their payment is recorded in your accounts receivable. There’s usually a time frame, also called credit terms and payment terms, associated with payment due.
Capital: Debt and Equity
Debits and Credits
From computers, to furniture, machinery and other tangible assets, loss of value takes place over time. You can account for that loss with a simple formula: depreciation=asset purchase-salvage value/useful life.
Profit and Loss Statement
These are some of the most basic accounting and basic bookkeeping principles and should help you communicate with your bookkeeper. If you rather have someone else keep track of your books, records and reports, reach out to Your Miami Beach Bookkeeping Department for expert handling at an affordable price.
Manal Oliver is both a certified accountant and bookkeeper, so you get the best of both worlds.