An entrepreneur may have a great idea, strong motivation, and dedicated employees, but without solid accounting, their venture will be doomed to fail. This article takes a look at the basics and importance of accounting.
What Do Accountants Do?
Accountants perform a wide range of tasks, but according to the Bureau of Labor Statistics, a general job description is that accountants “prepare and examine financial records.” They also assess a business’s financial workings and take care of tax payments. Accountants are important personnel from a managerial perspective, as they can provide managers with information needed to help a business thrive and avoid downturns.
Important Accounting Terms
The world of accounting encompasses many different terms and abbreviations, but here are a few of the most important ones:
• Assets are the items a business owns.
• Cash flow is the money coming into a company balanced against the money going out.
• Depreciation is a measure of the value an asset loses over time.
• Equity is used in multiple ways, but one definition is how much a business is worth after weighing its assets against its liabilities.
• Liabilities are the financial obligations of a business (i.e., an outstanding loan).
• Net income is what’s left over from income after subtracting the costs of running the business.
The Importance of Accounting in Small Businesses
Accounting is an important part of any successful small business. In order to keep your business going strong you or your accountant will need to keep track of all business finances. This is the only way a business owner can determine what money is coming in and going out. It will also help business owners plan for future expansions, or plan for dips in cashflow. Accounting can be an overwhelming task for a business owner who wears many hats, so it is wise to consider hiring a bookkeeper or CPA do this work for you.
For more help, contact Speritas Capital Partners today.