Setting up your accounting system for your Small business

There are four types of accounts: assets, liabilities, income, and expenses. First, you have to specify what type of an account you want to set up. There will be more than one account in your system, and you will need to set them up according to their parameters. The components of an accounting system may include, accounts receivable, accounts payable, order entry, inventory control, cost accounting, payroll, and fixed assets accounting. Accounts receivable and accounts payable are used to record sales data and bills that need to be paid. Individual information received from these components is sent up to a general ledger, which oversees all financial operations of a business.

There are certain restrictions that apply to each type of account. That is why it is very important to keep all accounts separate. This can be easily achieved in an automated computer program developed by experts that by-default sets parameters for different types of accounts so that you do not have to enter all information manually. It also helps to check errors that may cost a lot of money if left unnoticed. There are some other accounts as well that need to be considered, even though they are not updated daily or weekly. These accounts include bad debts and prepaid expenses.

Bad debt is the amount of money lost due to bad customers who place an order but never pay their dues. This information might be recorded in accounts receivable, but in order to distinguish these expenses from those, which will actually be received, one has to create a separate account. Similarly, prepaid expenses that come under accounts payable should be recorded separately. Once all your accounts have been set up, start entering data on a regular basis. Whenever you receive an invoice or write up a cheque, make appropriate changes in the computer system.

Most accounting software provide facility to generate and print out reports. These reports may include payment summary or any other type of information about your business in a summarized or easy-to-understand format. In addition to these, you can also generate management reports to calculate profit and loss for a given month or year. Remember to create a back up at the end of each financial year so that valuable information is not lost. This data helps to make intelligent business decisions later on in order to increase profits and control or mitigate loss. Keep all documents in one place so that they are easily found whenever needed.

Easy basics in Accounting

Assets

Assets are things that a company owns and are sometimes referred to as the resources of the company. Joe readily understands this—off the top of his head he names things such as the company's vehicle, its cash in the bank, all of the supplies he has on hand, and the dolly he uses to help move the heavier parcels. Marilyn nods and shows Joe how these are reported in accounts called Vehicles, Cash, Supplies, and Equipment. She mentions one asset Joe hadn't considered—Accounts Receivable. If Joe delivers parcels, but isn't paid immediately for the delivery, the amount owed to Direct Delivery is an asset known as Accounts Receivable.

Liabilities

The balance sheet reports Direct Delivery's liabilities as of the date noted in the heading of the balance sheet. Liabilities are obligations of the company; they are amounts owed to others as of the balance sheet date. Marilyn gives Joe some examples of liabilities: the loan he received from his aunt (Notes Payable or Loan Payable), the interest on the loan he owes to his aunt (Interest Payable), the amount he owes to the supply store for items purchased on credit (Accounts Payable), the wages he owes an employee but hasn't yet paid to him (Wages Payable).

Stockholders' Equity

If the company is a corporation, the third section of a corporation's balance sheet is Stockholders' Equity. (If the company is a sole proprietorship, it is referred to as Owner's Equity.) The amount of Stockholders' Equity is exactly the difference between the asset amounts and the liability amounts. As a result accountants often refer to Stockholders' Equity as the difference (or residual) of assets minus liabilities. Stockholders' Equity is also the "book value" of the corporation.

* referred from other accounting websites

25+ Tools For Accounting and Budgeting

Buxfer.com – Does a bit of everything in that it aggregates your different accounts from banks and credit cards, lets you budget and also lets you do shared accounting with other people. The service allows login via Open ID, Facebook , Google and more.

ClearCheckbook.com – This personal accounting system leaves you very little room to say you didn’t have time to update by giving you an iPhone interface and SMS updating, as well as via instant messenger services such as AIM, GTalk and more.

ElectricCheckBook.com – Besides the normal personal accounting tools, Electric CheckBook also allows you to invite others to join in for collaborative accounting which makes it perfect for new couples who are just opening their first checking account.

Foonance.com – Do your accounting, but instead of seeing where all of your money is going in a boring graph or chart, you give them tags and can see them represented in a tag cloud.

IndyBudget.com – Offers free accounts that will show you upcoming activity, recurring payments, budgeting and more. Also has a reasonably priced pro account you can upgrade to at any time that gives you even more features.

Mint.com – A completely free financial management tool that offers nice perks like integration with numerous banks, retrieves new transactions daily and even puts them into categories for you automatically. set budgets that will warn you when you’re close to going over and much more.

Money2Manage.com -Gives you all of the basic accounting tools you will need such as categories, report generation and money tracking, as well as access via the phone.

MyBillQ.com – Allows you to keep your personal accounting organized while also letting you set up shared expenses you may have with roommates, friends or family.

Quicken.Intuit.com – Probably the best known name in personal online accounting software. They do offer an online version that you can access from any Web browser so that you can keep your accounts up to date no matter where you happen to be.

Rudder.com – Delivers your information to you via email so that you don’t even have to visit their site to see how you’re doing.

Zefty.com – An accounting system for parents to help teach their kids about the value of money and how to manage it

GoBootstrap.com – Helps you fill out forms, remember to pay estimated taxes, get the most deductions possible, generate graphs to see how your business is doing and more.

LessAccounting.com – Attempts to be a more streamlined, less labor intensive accounting system for small businesses in an attempt to free up more of your time.

Peachtree.com – Peachtree brings their popular accounting software online, giving you features such as check writing, invoicing, sales and all of the other bells and whistles you would expect.

Quickbooks.Intuit.com – The well known Intuit program also has an online version that can allow multiple people to log in and view finances, perfect for businesses with multiple partners in different locations.

numia.biz - An Free Online accounting service. Very easy to handle it, have video tutorials and basic accounting concepts. It helps in keeping the records secured.

TheBudket.com – You can use this system for financial planning, cash flow analysis, collaborative accounting and more.

Budget.10try.com -The Plan2spend app allows you to keep track of all your expenditures while giving you a glimpse as to what your future balance will be so that you can avoid overdrafts.

BudgetEdge.com – BudgetEdge doesn’t only help you keep track of your current expenses and assets, but it also helps you predict how much you will have left at the end of the next payment cycle so long as you enter all of your information faithfully.

ExpenseView.com – Enter your expenses to get a better grip on what is eating up the majority of your budget.

Gastus.com – While not a full accounting app like the majority of the others, it does let you track your expenses to see where your money is going and also offers an iPhone interface for updating on the go.

Mvelopes.com – Helps you see exactly where your money is going and tries to find money you are losing in “hidden” fees and expenditures.

Billhighway.com – A shared accounting system designed with non-profit groups and Greek organizations in mind.

Billshare.org – Allows you to easily share expenses with others by creating receipts for one another and having them delivered via RSS.

Expensure.com – A unique accounting system that helps roommates pool their expenses and then divide them while keeping track of who owes money to bill collectors or other roommates.

Money.Tra.in – An accounting system specifically for people living together that need to split bills. Has an old school ASCII feel to its graphics.

Spendji.com – System for keeping track of projects and plans for friends, groups and organizations.

SpicyDigits.com – A group accounting system that allows any member to enter a new expense and then an automatic email is sent to each member informing them of their share. Allows you to invite new members as needed.