Basic Accounting Principles

Posted by Pierre de la Fortune on August 03, 2015 @ 12:01 a.m.

Written by Rieva Lesonsky

Most businesses typically use one of two basic accounting methods in their bookkeeping systems: cash basis and accrual basis. While most businesses use the accrual basis, the most appropriate method for your company depends on your sales volume, whether or not you sell on credit, and your business structure. The cash method is the most simple in that the books are kept based on the actual flow of cash in and out of the business. Income is recorded when it is received, and expenses are reported when they are actually paid. The cash method is used by many sole proprietors and businesses with no inventory.

From a tax standpoint, it is sometimes advantageous for a new business to use the cash method of accounting. That way, recording income can be put off until the next tax year, while expenses are counted right away.

With the accrual method, income and expenses are recorded as they occur, regardless of whether or not cash has actually changed hands. An excellent example is a sale on credit. The sale is entered into the books when the invoice is generated rather than when the cash is collected. Likewise, an expense occurs when materials are ordered or when a workday has been logged in by an employee, not when the check is actually written. The downside of this method is that you pay income taxes on revenue before you've actually received it.

Should you use the cash or accrual method? The accrual method is required if your annual sales exceed $5 million and your venture is structured as a corporation. In addition, businesses with inventory must also use this method. It also is highly recommended for any business that sells on credit, as it more accurately matches income and expenses during a given time period. The cash method may be appropriate for a small, cash-based business or a small service company. You should consult your accountant when deciding on an accounting method.

For more info please visit: http://www.entrepreneur.com/article/21908

Is this article helpful?

Comments

p[

Leave your comments here...

フェンディ バッグ スパンコ`ル

フェンディ バッグ スパンコ`ル http://ameblo.jp/hivison/entry-11998732084.html FENDI ダウン http://ameblo.jp/hivison/entry-11998735267.html FENDI キ`ケ`ス 協 http://ameblo.jp/ribenaa/entry-11998726311

FENDI バッグ ミニ

FENDI バッグ ミニ http://ameblo.jp/ribenaa/entry-11998731895.html フェンディ 卅鬱 http://ameblo.jp/hivison/entry-11998729129.html FENDI 弍めがけ http://ameblo.jp/hivison/entry-11998737366.html フェンデ

フェンディ 下 芦い

フェンディ 下 芦い http://ameblo.jp/ribenaa/entry-11998728695.html フェンディ 下 咾 http://ameblo.jp/hivison/entry-11998737438.html フェンディ L下 \ http://ameblo.jp/visonjp/entry-119

blueskycvs

nike lunar womens tennis shoes nike air max hyperfuse cena womens nike air presto blue grey nike air max vision nike atlanta falcons 21 desmond trufant 2014 usa flag fashion black elite jersey ,jordan 6 white and blue,nike air force white harga,washington nationals hats for sale kansas city mo ,minnesota twins black ha

how to make a childs christmas hat transparent

womens asics gel kinsei 5 black shoes for discount,cheap all red women air

nike air max 2015 womens grey silver

nike air force 1 white red nike air max khaki air jo

atlanta braves world series hat rack

nike air max 95 mens all black ,nike lunarestoa 2 essential trainer mrantifun at

jordan 9 black white gold shoes on sale

jordan 6 tout rouge chaussures on vente,nike free rn motion fl

nike elastico 2 pink

air max typha training shoes review ,nike internationalist herren ladenzeile nike e

cheap nike hypervenom shoes

cheap air jordan 11 shoes,cheap nike hypervenom shoes,baby boy cable hat knitting pattern queen ,boston red s

femminile air jordan 6 nero rosso scarpe on vendit

nike air zoom 90 it black gold shoes on sale ,nike magi

women nike free rn

new york yankees hat toddlers uk archives ,boston red sox gatsby hat number wo

nike air max one black and white

nike lunar ballistec limited edition nike huarache ultra breathe negro tenis nike shox original barato jordan retro 12 dark bleu adidas crazy light boost 2015 ebay nz ,nike magista obra oferta 2017 nike hypervenomx pro

Write something about this article:



Money Blitz Word of the Day

Accounting -- a system for keeping score in business, using dollars.

Money Blitz Quote of the Day

Go the extra mile. It's never crowded. -Author Unknown

WatchList Quote

Major Index WatchList

EUR & USD Interactive Chart