Accounting for small business
Why do expenses belong with assets? Remember that these are not accounts payable/money that is still owed to others. This last part - how you increase your accounts - is the most confusing aspect of Excel for small businesses, and I’ll return to it momentarily.Īssets and expenses belong on the left side of a balance sheet (or balance equation), while liabilities, equity, and revenue belong on the right. Create a list of all your accounts including what type of accounts they are and how you increase them. The first page of your Excel accounting workbook should be a chart of accounts. In addition to your balance sheet, you need to keep worksheets for each of the accounts included on it. In accrual accounting, you need more than a single ledger. Every time you increase or decrease one side of the equation, you need to do the same to the other. Double-entry accounting helps you ensure that you keep this equation balanced. This is where double-entry bookkeeping comes in.
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Your Excel accounting might look something like this: You also need to collect a payment from the Johnson family. On that day, you need to pay the florist for the upcoming Johnson wedding. On July 8, 2021, you begin the day with $750 in your account. Your spreadsheet should have at least the following columns: But your fundamental accounting tracks money only when it changes hands. You can - and should - keep additional records of accounts payable (money you owe) and accounts receivable (money owed to you). Many small businesses prefer to use this system because of its simplicity. That’s all there is to cash basis accounting. They would regularly look over these lists to ensure that they always knew how much money they had available. They’d record income and expenses to their account. Once upon a time, people used to balance their checkbooks by hand. Along the way, I’ll also demystify double-entry (or dual-entry) accounting.
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I’ll discuss the difference between cash basis and accrual accounting. These are the most basic forms of accounting, and you can perform any of them by using Excel. There’s even a world championship in Microsoft Office applications. You can perform near miracles using Excel spreadsheets. So take a deep breath, brace yourself, and let’s run the numbers. Whether you’re a full-time small-business owner or an employee with your own side business, you can find the tools you need in Excel. accrual-basis accounting and the double-entry method.But Excel accounting for small business doesn’t require you to be one either.Īll you need is a brief orientation and some useful templates and formulas. I won’t pretend that I’ve transformed into a number-loving accounting superstar. The mention of double-entry bookkeeping used to put me to sleep - and then give me stress nightmares.