Accounting is the language of business. It is important for business owners to understand this language, and to do so they must learn the basics of accounting. Very often I encounter small business owners who don’t. Some studied it years ago in school and have since forgotten. Others have played around in QuickBooks. Others know nothing. To run a successful business for the long term, small business owners must learn more about their financial status and what the numbers mean.
Over the next three months Keeping it Simple is going to go back to the basics of accounting. This series is designed to help small business owners learn what is how accounting, why it is important, and how to make use of it. We will explore the principles, frameworks, actions, terminology, standard financial statements, taxation, and more. By no means will this series cover everything, but it will serve as a great introduction.
Accounting is a practice. Like a medical or law practice, it is impossible to know everything. For this series we are going to focus primarily on the accrual basis of accounting. This is the method that all publicly-traded companies must use. The accrual basis is built upon several guiding principles which makes it the best method for determining profitability. We will also cover the cash basis of accounting, which most small businesses use.
As a CPA and trusted advisor, it is my duty to help my clients understand as much as they want to know about their financials. Accounting is a powerful tool. Everything a business does is reflected somewhere in financials. It takes knowledge and experience to tease the story out. Armed with insights, business owners can pinpoint the good, the bad, and opportunities.
I hope you will join me here over the next several weeks as we go back to basics and learn about accounting!