Basic Accounting Principles for your Business

Businessesor individuals adapting to financial record keeping need to followsome of the basic rules or principles of accounting as in any otheractivity. It better not to go ahead with accounting without followingthe basics or the Generally Accepted Accounting Principles(GAAP),that may rather end in messing up with finances. Apart from this byadhering to proper accounting guide lines makes both the internal andexternal customers confident about an organization. Most accounts of businesses are based on two methods of accountingthe cash basis and accrual basis. In cash basis accounting thetransactions are recorded based only on the transfer of cash, likewhen the cash is received it is recorded instantly, expenses arerecorded only when the real payment happens. In the accrual methodwhether the cash is paid or not the transaction is recorded and thecredit owed to the company and credit owed by the company isrecorded. Almost most of the small business people follow the cash method asthe number of transaction will be less as the information of paymentscan be noted down easily. But in case of large corporations accrualmethod is most preferred. Small business owners can manipulate theirrevenues from the eyes of tax authorities by recording the cashreceived to the next financial year to evade tax. But largecorporations cannot do this because of large amount of cashtransactions and the other factor is the fear of loosing theirreputation with stakeholders if tracked by the government agencies. Whatever accounitng principle is followed it is mandatory nowadays tohave an accounting information system in place. Small business peoplewill find difficulty in investing for this kind of a setup. To getmore functionality and accuracy as expected with information system,but always with a higher price tag. Numia, a simple online service that is aimed at small businessaccounting with the flexibility of using both the cash and accrualbasis of accounting. Even though it is aimed at small businessaccounting it can be used by even larger companies due to fact thatit supports accrual basis accounting.

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