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<\/a><\/figure><\/div>\n\n\n<\/span>What is Small Business?<\/span><\/h2>\n\n\n\nSmall business is a relative concept; some businesses are small by area, some by people, and some by operation. To be very clear about the statement, you can consider a few parameters as a small business.<\/p>\n\n\n\n
These parameters are not set by law or rulebook but only for better understanding. If your business fits into any of the following parameters, you can consider your business as a small business.<\/p>\n\n\n\n
<\/span>By employee Number<\/span><\/h3>\n\n\n\n\n- Less than 20 Employees for Service Sector<\/li>\n\n\n\n
- Less than 40 Employees for Trade Sector<\/li>\n<\/ul>\n\n\n\n
<\/span>By Workplace:<\/span><\/h3>\n\n\n\n\n- Having less than three outlets<\/li>\n<\/ul>\n\n\n\n
<\/span>By Operations<\/span><\/h3>\n\n\n\n\n- Having less than 200 purchase orders per month for the trade sector<\/li>\n\n\n\n
- Less than 100 invoices per month for service Sector<\/li>\n<\/ul>\n\n\n\n
<\/span>By Sales<\/span><\/h3>\n\n\n\n\n- Annual Turnover less than 5 Crore for trade sector. Average daily sales less than 1.5 Lakh (approx.)<\/li>\n\n\n\n
- Annual Turnover less than 2 Crore for service sector.<\/li>\n<\/ul>\n\n\n\n
<\/span>By Type<\/span><\/h3>\n\n\n\n\n- Retail stores, Food outlets, hardware stores, Electronics shops, Book stores, etc.<\/li>\n\n\n\n
- Small service provides: Repair Services, Renting, Servicing, etc.<\/li>\n\n\n\n
- Professional, Doctors, Consultants, CA, Translators, etc.<\/li>\n<\/ul>\n\n\n\n
\n\n\n\n<\/span>What Is Small Business Accounting?<\/span><\/h2>\n\n\n\nSmall business accounting is a process to record, track and maintain financial records. Accounting for small business emphasizes on invoicing, bank statement tracking, vendor & debt ledger management<\/a>, and expense tracking.<\/p>\n\n\n\nIf you maintain a diary, cashbook, or excel sheet to track the expenses, sales, or payments. In that case, you are in the initial phase of accounting, i.e., bookkeeping. But here, we are not talking about recording transactions but keeping track of all these transactions in a smarter way for your business.<\/p>\n\n\n\n
<\/span>Priorities of SMB Accounting<\/span><\/h2>\n\n\n\nThe priorities of accounting for small business owners are very different from the accounting system of large businesses. Here are the significant solutions offered by the SMB accounting software<\/a>.<\/p>\n\n\n\n\n- Invoicing<\/li>\n\n\n\n
- Expense Tracking<\/li>\n\n\n\n
- Purchase Record<\/li>\n\n\n\n
- Sales Record<\/li>\n\n\n\n
- Accurate Creditor Ledger<\/li>\n\n\n\n
- Accurate Debtors Ledger<\/li>\n\n\n\n
- Bank Statement Reconciliation<\/li>\n\n\n\n
- GST and Income Tax Return<\/li>\n\n\n\n
- Balance Sheet, Profit, and Loss, Cash Flow Statement preparation<\/li>\n<\/ul>\n\n\n\n
\n\n\n\n<\/span>Basic Accounting Terminologies That Keep You Thinking<\/span><\/h2>\n\n\n\n![\"accounting](\"https:\/\/cdn.techjockey.com\/blog\/wp-content\/uploads\/2021\/12\/accounting-for-small-business-1024x536.png\")
<\/figure><\/div>\n\n\nHere, we list down a few essential and basic financial terminology that every small business owner should know.<\/p>\n\n\n\n
\n- Revenue\/ Sales \/ Income: <\/strong>Income from the business is revenue, which you can term as sales. Sales could either be in cash or credit.<\/li>\n\n\n\n
- Creditors\/ Payables: <\/strong>Creditors are the people to whom you owe money. These could be suppliers, banks, employees, or any other person or company.<\/li>\n\n\n\n
- Debtors\/ Receivables: <\/strong>Debtors are the people to whom you have sold something on credit, and they still owe you money.<\/li>\n\n\n\n
- Ledger: <\/strong>A ledger is a record of all the transactions related to a particular person, entity, or type. A ledger provides consolidated records of all related transactions and due balances. Supplier ledger, debtor ledger are the most common examples.<\/li>\n\n\n\n
- Budget: <\/strong>A budget is an estimation of revenue and expenses drafted for a specific period or financial operation. Budgets are based on past analysis and forecasts.<\/li>\n\n\n\n
- Bank Statement: <\/strong>Bank statement is a report that contains all your bank account transactions.<\/li>\n\n\n\n
- Asset: <\/strong>An asset is anything that has value, whether physical or non-physical. Land, Building, furniture, computers, etc.<\/li>\n\n\n\n
- Liability: <\/strong>A liability is a debt or an obligation that a business owes. For example, rent payable for the month, interest payable.<\/li>\n\n\n\n
- Financial Year: <\/strong>The period between 1st April of the starting year and 31st March of the succeeding year.<\/li>\n\n\n\n
- GST: <\/strong>GST (Goods and Service Tax) is an indirect tax you must charge to your customers in India. It’s levied on the sale of goods or services. GST rate in India is 5%, 12%, 18%, or 28%, depending on the type of goods or service.<\/li>\n\n\n\n
- Financial Statement: <\/strong>Financial statement is a report that provides all the information about your business and its activities. Balance Sheet, P\/L Statement, and cash flow statement are major examples of financial statements.<\/li>\n<\/ul>\n\n\n\n
<\/span>Financial Statements for Small Business<\/span><\/h2>\n\n\n\nFinancial statements are consolidated and summarized reports representing all the business transactions in different financial periods. They give an overall picture of accounting activities, performance, and financial health. Here are the most important financial statements for small business:<\/p>\n\n\n\n
\n- Balance Sheet: <\/strong>This is one of the most important financial reports for any business. Balance sheet for small business represents the financial standing of your assets, liabilities, and equity at the end of the financial year.<\/li>\n\n\n\n
- P\/L Statement: <\/strong>Profit and loss statement for small business shows income and expenses for a particular financial year. It helps you see whether your business is making a profit or loss and the reason behind it.<\/li>\n\n\n\n
- Cash Flow Statement: <\/strong>The cash flow statement gives a complete picture of your business inflow, rotation, and outflow of cash.<\/li>\n<\/ul>\n\n\n\n
\n\n\n\n<\/span>Accounting Reports for Small Businesses<\/span><\/h2>\n\n\n\nReports are the summarized data related to any specific financial transaction of business. Some of the accounting reports for small businesses are:<\/p>\n\n\n\n
\n- Sales Reports: <\/strong>This report tells you how much revenue your business has generated from sales. It can be further segregated in terms of products, customers, or other factors.<\/li>\n\n\n\n
- Purchase Report: <\/strong>This report shows purchases made by your business over a particular time. It can be segregated on the basis of different types of purchases, suppliers, or other factors.<\/li>\n\n\n\n
- GST Reports: <\/strong>GST Return reports, also known as GSTR reports, provide helpful information about GST you have paid or collected, and the exact GST payable for the month.<\/li>\n\n\n\n
- Expense Reports: <\/strong>An expense report helps track your business expenses. It gives you the list of expenses for a particular period so that you can track, monitor, and analyze them.<\/li>\n<\/ul>\n\n\n\n
<\/span>How to Do Accounting for Small Business: Cash vs. Accrual Accounting<\/span><\/h2>\n\n\n\n![\"cash](\"https:\/\/cdn.techjockey.com\/blog\/wp-content\/uploads\/2021\/12\/cash-vs-accrual-accounting-1024x536.png\")
<\/figure><\/div>\n\n\nIf you haven’t studied accounting in your college, you might wonder what are cash and accrual accounting methods. Let\u2019s explain both these bookkeeping services for small business<\/a> in layman terms.<\/p>\n\n\n\n<\/span>What is Cash Accounting?<\/span><\/h3>\n\n\n\nCash Accounting refers to recording a transaction is recorded only when consideration is exchanged. For example, if you own a book shop, you sell books and immediately receive cash from customers.<\/p>\n\n\n\n
You can quickly enter the transaction in your accounting software or books when the sale is completed. Whenever you order books from a supplier, you record the purchase transaction only when you pay the supplier by cash, cheque or wire transfer.<\/p>\n\n\n\n
<\/span>What is Accrual Accounting?<\/span><\/h3>\n\n\n\nThe accrual accounting system involves transactions that are recorded and due. This accounting method has nothing to do with payment and receipt. The accrual method depends on the accrual of events instead of an exchange of considerations.<\/p>\n\n\n\n
Suggested Read: Difference Between Cash Basis Vs Accrual Basis of Accounting: Which is Better for SMBs?<\/a><\/strong><\/p>\n\n\n\n<\/span>Difference Between Cash and Accrual Accounting Method<\/span><\/h2>\n\n\n\n
- \n
- Less than 20 Employees for Service Sector<\/li>\n\n\n\n
- Less than 40 Employees for Trade Sector<\/li>\n<\/ul>\n\n\n\n
<\/span>By Workplace:<\/span><\/h3>\n\n\n\n
- \n
- Having less than three outlets<\/li>\n<\/ul>\n\n\n\n
<\/span>By Operations<\/span><\/h3>\n\n\n\n
- \n
- Having less than 200 purchase orders per month for the trade sector<\/li>\n\n\n\n
- Less than 100 invoices per month for service Sector<\/li>\n<\/ul>\n\n\n\n
<\/span>By Sales<\/span><\/h3>\n\n\n\n
- \n
- Annual Turnover less than 5 Crore for trade sector. Average daily sales less than 1.5 Lakh (approx.)<\/li>\n\n\n\n
- Annual Turnover less than 2 Crore for service sector.<\/li>\n<\/ul>\n\n\n\n
<\/span>By Type<\/span><\/h3>\n\n\n\n
- \n
- Retail stores, Food outlets, hardware stores, Electronics shops, Book stores, etc.<\/li>\n\n\n\n
- Small service provides: Repair Services, Renting, Servicing, etc.<\/li>\n\n\n\n
- Professional, Doctors, Consultants, CA, Translators, etc.<\/li>\n<\/ul>\n\n\n\n
\n\n\n\n<\/span>What Is Small Business Accounting?<\/span><\/h2>\n\n\n\n
Small business accounting is a process to record, track and maintain financial records. Accounting for small business emphasizes on invoicing, bank statement tracking, vendor & debt ledger management<\/a>, and expense tracking.<\/p>\n\n\n\n
If you maintain a diary, cashbook, or excel sheet to track the expenses, sales, or payments. In that case, you are in the initial phase of accounting, i.e., bookkeeping. But here, we are not talking about recording transactions but keeping track of all these transactions in a smarter way for your business.<\/p>\n\n\n\n
<\/span>Priorities of SMB Accounting<\/span><\/h2>\n\n\n\n
The priorities of accounting for small business owners are very different from the accounting system of large businesses. Here are the significant solutions offered by the SMB accounting software<\/a>.<\/p>\n\n\n\n
- \n
- Invoicing<\/li>\n\n\n\n
- Expense Tracking<\/li>\n\n\n\n
- Purchase Record<\/li>\n\n\n\n
- Sales Record<\/li>\n\n\n\n
- Accurate Creditor Ledger<\/li>\n\n\n\n
- Accurate Debtors Ledger<\/li>\n\n\n\n
- Bank Statement Reconciliation<\/li>\n\n\n\n
- GST and Income Tax Return<\/li>\n\n\n\n
- Balance Sheet, Profit, and Loss, Cash Flow Statement preparation<\/li>\n<\/ul>\n\n\n\n
\n\n\n\n<\/span>Basic Accounting Terminologies That Keep You Thinking<\/span><\/h2>\n\n\n
\n<\/figure><\/div>\n\n\nHere, we list down a few essential and basic financial terminology that every small business owner should know.<\/p>\n\n\n\n
- \n
- Revenue\/ Sales \/ Income: <\/strong>Income from the business is revenue, which you can term as sales. Sales could either be in cash or credit.<\/li>\n\n\n\n
- Creditors\/ Payables: <\/strong>Creditors are the people to whom you owe money. These could be suppliers, banks, employees, or any other person or company.<\/li>\n\n\n\n
- Debtors\/ Receivables: <\/strong>Debtors are the people to whom you have sold something on credit, and they still owe you money.<\/li>\n\n\n\n
- Ledger: <\/strong>A ledger is a record of all the transactions related to a particular person, entity, or type. A ledger provides consolidated records of all related transactions and due balances. Supplier ledger, debtor ledger are the most common examples.<\/li>\n\n\n\n
- Budget: <\/strong>A budget is an estimation of revenue and expenses drafted for a specific period or financial operation. Budgets are based on past analysis and forecasts.<\/li>\n\n\n\n
- Bank Statement: <\/strong>Bank statement is a report that contains all your bank account transactions.<\/li>\n\n\n\n
- Asset: <\/strong>An asset is anything that has value, whether physical or non-physical. Land, Building, furniture, computers, etc.<\/li>\n\n\n\n
- Liability: <\/strong>A liability is a debt or an obligation that a business owes. For example, rent payable for the month, interest payable.<\/li>\n\n\n\n
- Financial Year: <\/strong>The period between 1st April of the starting year and 31st March of the succeeding year.<\/li>\n\n\n\n
- GST: <\/strong>GST (Goods and Service Tax) is an indirect tax you must charge to your customers in India. It’s levied on the sale of goods or services. GST rate in India is 5%, 12%, 18%, or 28%, depending on the type of goods or service.<\/li>\n\n\n\n
- Financial Statement: <\/strong>Financial statement is a report that provides all the information about your business and its activities. Balance Sheet, P\/L Statement, and cash flow statement are major examples of financial statements.<\/li>\n<\/ul>\n\n\n\n
<\/span>Financial Statements for Small Business<\/span><\/h2>\n\n\n\n
Financial statements are consolidated and summarized reports representing all the business transactions in different financial periods. They give an overall picture of accounting activities, performance, and financial health. Here are the most important financial statements for small business:<\/p>\n\n\n\n
- \n
- Balance Sheet: <\/strong>This is one of the most important financial reports for any business. Balance sheet for small business represents the financial standing of your assets, liabilities, and equity at the end of the financial year.<\/li>\n\n\n\n
- P\/L Statement: <\/strong>Profit and loss statement for small business shows income and expenses for a particular financial year. It helps you see whether your business is making a profit or loss and the reason behind it.<\/li>\n\n\n\n
- Cash Flow Statement: <\/strong>The cash flow statement gives a complete picture of your business inflow, rotation, and outflow of cash.<\/li>\n<\/ul>\n\n\n\n
\n\n\n\n<\/span>Accounting Reports for Small Businesses<\/span><\/h2>\n\n\n\n
Reports are the summarized data related to any specific financial transaction of business. Some of the accounting reports for small businesses are:<\/p>\n\n\n\n
- \n
- Sales Reports: <\/strong>This report tells you how much revenue your business has generated from sales. It can be further segregated in terms of products, customers, or other factors.<\/li>\n\n\n\n
- Purchase Report: <\/strong>This report shows purchases made by your business over a particular time. It can be segregated on the basis of different types of purchases, suppliers, or other factors.<\/li>\n\n\n\n
- GST Reports: <\/strong>GST Return reports, also known as GSTR reports, provide helpful information about GST you have paid or collected, and the exact GST payable for the month.<\/li>\n\n\n\n
- Expense Reports: <\/strong>An expense report helps track your business expenses. It gives you the list of expenses for a particular period so that you can track, monitor, and analyze them.<\/li>\n<\/ul>\n\n\n\n
<\/span>How to Do Accounting for Small Business: Cash vs. Accrual Accounting<\/span><\/h2>\n\n\n
\n<\/figure><\/div>\n\n\nIf you haven’t studied accounting in your college, you might wonder what are cash and accrual accounting methods. Let\u2019s explain both these bookkeeping services for small business<\/a> in layman terms.<\/p>\n\n\n\n
<\/span>What is Cash Accounting?<\/span><\/h3>\n\n\n\n
Cash Accounting refers to recording a transaction is recorded only when consideration is exchanged. For example, if you own a book shop, you sell books and immediately receive cash from customers.<\/p>\n\n\n\n
You can quickly enter the transaction in your accounting software or books when the sale is completed. Whenever you order books from a supplier, you record the purchase transaction only when you pay the supplier by cash, cheque or wire transfer.<\/p>\n\n\n\n
<\/span>What is Accrual Accounting?<\/span><\/h3>\n\n\n\n
The accrual accounting system involves transactions that are recorded and due. This accounting method has nothing to do with payment and receipt. The accrual method depends on the accrual of events instead of an exchange of considerations.<\/p>\n\n\n\n
Suggested Read: Difference Between Cash Basis Vs Accrual Basis of Accounting: Which is Better for SMBs?<\/a><\/strong><\/p>\n\n\n\n
<\/span>Difference Between Cash and Accrual Accounting Method<\/span><\/h2>\n\n\n\n
- Purchase Report: <\/strong>This report shows purchases made by your business over a particular time. It can be segregated on the basis of different types of purchases, suppliers, or other factors.<\/li>\n\n\n\n
- P\/L Statement: <\/strong>Profit and loss statement for small business shows income and expenses for a particular financial year. It helps you see whether your business is making a profit or loss and the reason behind it.<\/li>\n\n\n\n
- Creditors\/ Payables: <\/strong>Creditors are the people to whom you owe money. These could be suppliers, banks, employees, or any other person or company.<\/li>\n\n\n\n
- Revenue\/ Sales \/ Income: <\/strong>Income from the business is revenue, which you can term as sales. Sales could either be in cash or credit.<\/li>\n\n\n\n
- Having less than three outlets<\/li>\n<\/ul>\n\n\n\n