Accounting is one of the most important aspects of a business simply because it is the only way one will be able to monitor the inflow and outflow of money. If one owns a small enterprise, he does not need to hire a really good accountant as he can be able to handle the numbers himself. The least that he is supposed to know would be basic small business accounting and bookkeeping.
Now when one would begin the cycle, he would of course begin with the journal entries as this is the recording of the day to day activities of the enterprise. Now one would have to buy a journal notebook or use a worksheet in order to jot down all the activities that would occur. As for the account titles, one can actually search the internet for them if he does not know them.
Now if the journal contains all the raw information, then the ledger would contain all the organized information. The purpose of the ledger is to make sure that all the account titles are organized and all the amounts are collected together under one account title. This way, one will be able to know all the monthly activities.
After the ledger has been created, then the next thing that has to be made would be the trial balance. Now the trial balance is made so that one can be prepared to make the balance sheet. One will already be able to see if the numbers would tally in the trial balance so he will not make a mistake when making the balance sheet.
Now once that is already done, then one will be creating the balance sheet in a ten column worksheet. Now if one is not sure how to make one, he may search the net. However, one thing he should know is that the financial statement would contain the total assets, liabilities, and equity and that the assets have to be the same as the liabilities and equity combined.
After the making of the balance sheet, then the next statement to create would be the income statement. The income statement contains all the income of the business and the expenses as well. When all those accounts are collected, then one will be subtracting the expenses to the income to know if the business has incurred a gain or a loss.
After he is done with that, then the last thing he has to create would be the statement of equity which monitors all his capital. Basically, this statement would contain the beginning capital, the additional investments, the withdrawals, and the ending capital. He will start with the beginning capital, then add the investments, and subtract the withdrawals, and the ending capital will come out.
Now after he has created those financial statements, he will more or less have an idea if his enterprise is actually doing well or not. Now the thing about small enterprises is that since it is not very big, an official accountant may not be needed for the process. However, it also means that the owner has to be adept at following the accounting cycle and creating the financial statements.
Now when one would begin the cycle, he would of course begin with the journal entries as this is the recording of the day to day activities of the enterprise. Now one would have to buy a journal notebook or use a worksheet in order to jot down all the activities that would occur. As for the account titles, one can actually search the internet for them if he does not know them.
Now if the journal contains all the raw information, then the ledger would contain all the organized information. The purpose of the ledger is to make sure that all the account titles are organized and all the amounts are collected together under one account title. This way, one will be able to know all the monthly activities.
After the ledger has been created, then the next thing that has to be made would be the trial balance. Now the trial balance is made so that one can be prepared to make the balance sheet. One will already be able to see if the numbers would tally in the trial balance so he will not make a mistake when making the balance sheet.
Now once that is already done, then one will be creating the balance sheet in a ten column worksheet. Now if one is not sure how to make one, he may search the net. However, one thing he should know is that the financial statement would contain the total assets, liabilities, and equity and that the assets have to be the same as the liabilities and equity combined.
After the making of the balance sheet, then the next statement to create would be the income statement. The income statement contains all the income of the business and the expenses as well. When all those accounts are collected, then one will be subtracting the expenses to the income to know if the business has incurred a gain or a loss.
After he is done with that, then the last thing he has to create would be the statement of equity which monitors all his capital. Basically, this statement would contain the beginning capital, the additional investments, the withdrawals, and the ending capital. He will start with the beginning capital, then add the investments, and subtract the withdrawals, and the ending capital will come out.
Now after he has created those financial statements, he will more or less have an idea if his enterprise is actually doing well or not. Now the thing about small enterprises is that since it is not very big, an official accountant may not be needed for the process. However, it also means that the owner has to be adept at following the accounting cycle and creating the financial statements.
