Many new business owners are daunted by the mere idea of bookkeeping and accounting. But in reality, both are pretty simple. Keep in mind that bookkeeping and accounting share two basic goals: to keep track of your income and expenses, which improves your chances of making a profit, and to collect the financial information necessary for filing your various tax returns. Depending on the size of your business and amount of sales, you can create your own ledgers and reports, or rely on accounting software.
One of the first things any new business must decide on is how its records will be kept. Accurate record keeping is a key to many aspects of your business's success -- from assessing your operation's profit margins to ensuring that you're in compliance with IRS tax rules. Luckily, the IRS does not require
The cash method and the accrual method of accounting differ in the timing of when transactions are credited or debited. The accrual method counts income when the sale occurs, and counts expenses when you receive the goods or services. The cash method does not count income until cash (or a check) is actually received, and expenses are not counted until they are actually paid.
All businesses are required to pay taxes and keep accounting records year by year. You automatically choose your tax year when you file your tax year when you file the first tax return for your business. After that, you have to get IRS permission to change. The vast majority of small businesses use the