Accounting Basics for Small Business

business accounting
Small-business accounting is an array of financial procedures for calculating, handling, and communicating a company’s financial information. Payroll, taxes, management, purchases, and inventory are a few of these tasks.

Develop a bookkeeping system

Every business has to decide how to handle the bookkeeping. The choices are hiring someone to do it for you or learning to do it yourself. It is possible to learn how to manage your own books, and doing it yourself has a number of significant benefits.

You can find a bookkeeping solution that will meet your company’s demands thanks to the abundance of paid and free accounting software solutions available today. Additionally, small business owners must choose between using accrual or cash accounting.

There are four major types of expenses you should track

Meals and entertainment – There will be times you’ll discuss business over lunch or dinner, but to be able to claim as an expense, it has to be recorded. Details should include who the meal was with, what was discussed, and keep the receipt.

Travel – The IRS scrutinizes travel expenses to be sure they weren’t really for personal, so keep all receipts and good records.

Vehicle expenses – there are 2 methods that can be used to expense the business use of a car. One is the actual mileage for every time the vehicle was used for business and using the mileage rate the IRS allows. The other is recording mileage at the beginning and end of the year, what the business mileage was, and deducting the percentage of business to overall mileage in all car-related expenses. This includes maintenance, gas, loan interest, lease costs, etc.

Home office expense – if you work out of your home, you can possibly take a deduction for the percentage of your home’s square footage that is used. The space has to be used only for business and nothing else. You can deduct that percent of electric, mortgage, and other home expenses. It’s best to check with your accountant on how to claim a home office expense as the IRS keeps a close eye on this category.

Open a small-business bank account

Opening a bank account for business that is separate from your personal accounts provides a barrier that protects your personal finances in case the business is audited, goes bankrupt, or is sued in court. Having good records for the business and proof of business income will help to secure loans or funding in the future.


credit cards

Open a checking account first, then any savings accounts that can help in planning your taxes and organizing your cash flow. A savings account is a good way to set aside a portion of each payment to cover your self-employed tax withholding. A quarter of your salary should be set aside as a general rule, while estimates for high earners may be closer to one-third.

A separate bank account for business purposes is mandated by law for corporations, partnerships, and LLCs (Florida, Texas, and California LLCs have different guidelines). Having a separate account is not legally required for sole proprietors, although it is strongly advised.

New business owners should then apply for a credit card in the name of the business to start establishing credit, and to keep all business expenditures separate from personal, especially for LLCs and corporations. A credit card is good for financing large purchases or when you may need extra funding.

Tax obligations

How you choose to structure your business will determine what type of tax return you will need to file. If you are a sole proprietor and reporting as self-employed, all business information will go on your personal tax return, using a Schedule C. Otherwise you will need to file a separate business form for corporations and LLCs, both of which have their own EIN number and are taxed differently.

For peace of mind and to be sure you aren’t doing something that could bring about an audit, it’s best to meet with an accountant and go over all your particular details. Doing so can save you a lot of time, money, and headaches later.

Evolutionary Changes in the World of Accounting

A certified public accountant wears many different hats during a typical day. A CPA performs a large number of different functions, which are not completely understood by many. One can find certified public accountants in many different sectors of the workforce.


The role of a CPA is vast. Individuals who decide to specialize in auditing provide the assurance of financial statements and their integrity. When in the position of an auditor, a CPA needs to guarantee that financial statements are free of any mistakes or misrepresentation. Additionally, certified public accountants cannot perform an audit within a company where they may have family members working in positions of authority. There can never be any hint of impropriety but more than that, it is unethical to do so.

CPAs can also work in the sector of tax compliance and consulting. Individuals who choose this field of practice need to stay current with tax laws and regulations, which typically means continuing education seminars every year. There as so many new tax laws ever year that without this continuing course work, they would quickly be behind the times.

Not only are they able to perform services for individuals, but they are also able to work in the field of corporate tax compliance as well. Keep in mind that CPAs do not have the right to make decisions for management, nor can they accept any type of gift or compensation from their clients, excluding payment for services.

Accountants and CPAs can find work in almost every industry all over the world. From the world of entertainment, to government offices, and the field of technology, all of these companies require financial services. CPAs can also work for non-profit agencies and in school systems. Interestingly, the FBI also employs certified public accountants to investigate suspected embezzlement.

Not only can accountants and CPAs work in any industry, but they can have clients from every part of the United States, no matter where their office is. As long as they are licensed by their home state, they can serve clients long distance. Files are easily transferred and phone and skype communication is all that is needed. Not all accountants take long-distance clients, but many thrive on it. An accountant in Boca Raton, Jeffrey D. Ressler & Associates, has had many out of state clients over the years, and works as well with them as he does those in his local area.

Most people who want a career in accounting start their journey in college. Obtaining a BA or Masters in Accounting is the first step in becoming a certified public accountant. After obtaining a job in the field of accounting such as an accountant manager or budget analyst, the next step should be to strive to pass the four-part exam to become a certified public accountant.

From that point, there are many lucrative positions to be found, such as a comptroller and Chief Financial Officer (CFO). Many large companies hire for this position and most will pay moving expenses and bonuses for new hires. Because these are important positions for a company, they typically use an outside firm to handle the initial hiring process.

CPAs are often known as defenders because it is their sole duty to defend the financial reporting quality for individuals, small businesses, and major corporations. Unlike accountants, CPAs are permitted to act as a “stand-in” in regards to communications with the IRS.

A highly competent CPA is considered invaluable. Their training in the field of accounting allows them to develop an objective approach and strategy to resolving any issues that a company or individual may encounter financially.

CPA’s Don’t Get Much Sleep During Tax Season

CPA’s have several seasons when they are extremely busy, often working around the clock. Many businesses and individuals pay their taxes on a quarterly basis, along with the fact that business returns are due a month before individual returns, and you have for some very busy seasonal work.

When business returns file for an extension, all the extensions come due at the same time, meaning even more work when those quarter taxes need to be filed. One has to admit that it takes a certain type of temperament to work with numbers all day, and then when you add the season aspect of overwork to it, many people would not choose that line of work. Thankfully, there are many who do.