Why Do Accounts And What Is Involved In Doing It?

accounts-and-what-is-involved

  • Accounting will help you make and manage a workable budget for yourself and your business.
  • The numbers you get when you do accounting will help you estimate how much you or your business will make in the future.
  • Determined numbers will help you to know the perfect time to buy things you need and not go into major debt.
  • Accounting will help you know where your money goes and so you’re not wondering where some of your money is spent.
  • When you have excellent accountants like Accountancy Services, you will be able to keep your business finances at a healthy level.
  • Accounting will help you work out if you are able to get more workers or change the way you work.
  • When all your numbers are in order, it will be much easier for investors and banks to see what they have to work with.
  • With accurate numbers, you’ll be able to measure either growth or loss in your business.
  • It’s very important to have accurate and excellent accounting for you and your business. Accounting can be categorized into three major parts: gain and loss reports, balance reports, and cash flow reports.
  • Under the category of gain and loss, you will see what you receive in money after any cuts for expenses and other things. You will see reports of what money comes in, how much your goods or services are, revenue before cuts, and what money you will spend on necessary things that help your business run smoothly.
  • To calculate your gross profit, you will subtract the money you spent on the services or goods you sell from the money you made. To get your net profit, you will subtract what you spent on your business from your gross profit.
  • You will need to have what’s called a balance sheet. A balance sheet will give you an indication of how your business is doing whether or not it’s bleeding money or is successful and profitable. On your balance sheet, you will be managing your equities, liabilities, and assets.
  • Equity – how much your shares are worth
  • Liabilities – financial responsibilities like what a business owes in debt, taxes, etc.
  • Assets – what a business owns outright like property, vehicles, goods, furnishings, anything of value to the company
  • You will also need to document cash flow. You will need cash for day to day operations or things you want to invest in.
  • Your accountants can also help to predict what profits your business will make in a few years based on your business numbers. To determine yearly sales, just add what you made so far to a run rate and you times that by how many sales periods are left. For monthly sale predictions, divide last year’s leftover sales from what sales were made monthly the previous year times that by run rate then times that again by the leftover number of sales periods. If you want to calculate historical sales, you divide the number of sales periods from the most recent business revenue.
  • Because so much is at stake when calculating accounts, it is vital that businesses hire certified accountants to help do the paperwork and calculate numbers.

< Back to our Homepage page