Topic: Record keeping • Under accrual accounting, you measure the income

Subject: Entrepreneurship or expense when accrued. Examples are accounts

===================================== receivable and accounts payable. You would record
Record keeping important for small businesses the sales as receivable when recognized. You would
– Sole proprietor record the bills as expenses when received or
– Partnership incurred by you.
– Corporation • Companies that have inventory are supposed to use
What is Record Keeping? accrual accounting.
• Orderly and disciplined practice of storing business
records What is the Chart of Accounts?
• Ranges from simple (manila folder) to complex • Accounts examples such as cash, accounts payable,
(online electronic filing) accounts receivable, payroll, payroll taxes, long-
• Provides fast retrieval of records term loans, owner’s equity, telephone expense,
• Updated on a on-going basis utility expense, income, cost of goods
Remember – Keep good records, both business and Five major account groups:
personal 1. Assets
2. Liabilities
Why is Record Keeping Important? 3. Equity
1. Business Operations 4. Income
– Tracking details 5. Expense
– Planning
2. Legal Assets
– Contracts • Assets include both current and long term assets
– Licenses and permits • Current assets are cash, checking accounts,
– Payroll and personnel accounts receivable, and inventory
3. State and Local Taxes • Long term assets are notes receivable, tools and
equipment, land, buildings
Record Keeping Tools Liabilities
a) Simple “paper tools” • Liabilities include both short-term and long-
b) “Tickler” system term.
c) Computer systems • Short-term liabilities are defined as amounts that
d) Cloud computing are due within one year. Examples of short-term
• Accounting liabilities are accounts payable, payroll tax
• File hosting liabilities, and the portion of the long-term debt
that is owed for that year.
A. Simple “Paper Tools” • Long-term liabilities include notes payable,
• File folder bonds payable, loans.
• Hanging folder Equity
• Cabinet storage • Equity accounts represent what the owners have
• Accordion folder put into the company as well as the cumulative
B. “Tickler” System net earnings of the company.
• Use a tickler system to remind you of upcoming • Owners equity consists of both Owner’s
events such as: Contributions and Owner’s draw.
• Quarterly taxes • Retained earnings includes what the company
• License renewals has earned over the years.
• Insurance reviews and renewals Income
• Upcoming bills • You may want to set up several income accounts
• Call-backs if you have different streams of income from
C. Computer Systems different work activities.
• In addition to paper tools • The income and expense total – net earnings – is
• Takes less space than paper forwarded into the balance sheet.
• Faster and easier – Internet transmission Expense
• Many businesses and government agencies allow • You can create a number of different expense
use of Internet accounts so that you can properly track your
• Learn and grow into computer systems over time costs of your business.
• Be sure to BACK UP files daily • Some expenses are recurring on a monthly basis,
D. Cloud Computing e.g. telephone use while other expenses, such as
 Use the Internet to store, manage, and process data the purchase of tools or repair of equipment will
(vs. your own personal computer). vary.

Basic Bookkeeping

CASH VS. ACCRUAL ACCOUNTING

• Most businesses start with cash accounting. You
record income and expenses as you receive or pay
out the cash.