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.
After one has compiled all the activities of the month in a journal notebook, the next thing that he has to do would be to organize the information in the ledger. Basically, one would be combining all the amounts of the journal under the one general title in the ledger. This is to make sure that all titles would be organized properly.
Once the ledger has already been created, then one now has the total amount of all the account titles. From there, one will now be able to make the trial balance to get ready for the balance sheet. Basically, one would now be tallying the numbers in the trial balance so that he will minimize his mistakes made in 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.
When the balance sheet has already been made, then the next thing that he should do would be to create the income statement. The income statement is the financial statement that would record all the income minus the expenses. From here, he will know whether he incurred a net profit or a net loss through the month.
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 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.
After one has compiled all the activities of the month in a journal notebook, the next thing that he has to do would be to organize the information in the ledger. Basically, one would be combining all the amounts of the journal under the one general title in the ledger. This is to make sure that all titles would be organized properly.
Once the ledger has already been created, then one now has the total amount of all the account titles. From there, one will now be able to make the trial balance to get ready for the balance sheet. Basically, one would now be tallying the numbers in the trial balance so that he will minimize his mistakes made in 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.
When the balance sheet has already been made, then the next thing that he should do would be to create the income statement. The income statement is the financial statement that would record all the income minus the expenses. From here, he will know whether he incurred a net profit or a net loss through the month.
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.
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