As far as accounting or bookkeeping software is concerned, the two reports that are vital for financial purposes are the Balance Sheet and the Income Statement. I will explain what each one is and what purpose they serve. The Balance Sheet is simply a listing of balances of your assets and liabilities. Assets are anything major you purchase of value such as furniture, equipment, autos, computers, software etc. Assets are also any money you have in banks or other investments you such as CD’s. Liabilities are basically any debt obligations that you owe such as loans on the equipment or car you purchased for the business. It could also include things such as a line of credit at your bank or if you took out a home equity loan to use for business. The purpose of a balance sheet is to show what you are worth in terms of your business. Banks use this information to determine how you have been handling your business and may use this information to decide whether or not you are a good credit risk. Sometimes companies that you want to do business with will ask for the balance sheet.
Next, What is an Income Statement?
Provided by Alamo Bookkeeping Associates LLC
Saturday, February 20, 2010
Wednesday, February 10, 2010
Entering Each Item
So why enter each item? Well the advantage of entering each item in your bookkeeping system is so that if in the future you need to search for a transaction, you know you will be able to find it because you entered every single purchase. For example; you are a real estate investor and you know you bought some shrubs from Home Depot less than a year ago for a house but don’t remember exactly when. You now have some trees that have died and since Home Depot gives a one year warranty you need to find when you bought them to pull that particular receipt. You can do a search for landscape expenses in Quickbooks and get a listing of all the landscape purchases you made to find the transaction you are looking for. If you had done summary entries instead, you might have to look thru several months of receipts before you found the receipt you needed. So the main advantage is being able to search for transactions. Another reason may be because you know that you want to sell your business down the road and want to be able to show the transactions to a perspective buyer, in which case they may want to see the particular transactions you do for the business and not summary entries. Bottom line is you need to consider your future needs as to whether you should go ahead and enter each transaction or just summary entries.
Next, what kind of reports do I need to run?
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