Often, small-business owners or those who are self-employed do not necessarily benefit from purchasing accounting software and going through the learning process to use it to record business transactions. Good record keeping is key to managing a business's cash flow and for preparing financial statements and tax returns, so a minimal amount of accounting is required in order to properly run the business. Most small businesses can manage effectively by maintaining a ledger of the business checkbook.
Things You'll Need
- Spreadsheet software or columnar pad
Create a spreadsheet using a spreadsheet software program such as Microsoft Excel, or if your ledger will be handwritten, use graph paper or draw lines down a columnar pad to create separate columns.
Enter "Date" in the first column for a header. Enter "Check Number" in the second column header. Enter "Description" in the third column for a header. Enter "Deposit" in the fourth column for a header. In the columns after "Deposit," create a header based on the method you use to categorize business expenses. For example, Inventory, Office Supplies and Rent Expense. Enter "Balance" for the last column on the spreadsheet. Place a line under the column headers to separate them from the detail.
Record today's date on the first line under the column header, then enter "Balance Forward" in the Description column and the total in your checking account in the last column. This will give you a starting balance for your ledger.
Record payment of expenses and deposits in the lines following the balance forward. Enter the amount of the expense under the appropriate categorization in the header. Each time you enter a new expense or deposit, add or subtract that amount from the Balance Forward amount in the previous line and record the new amount on the current entry line.
Total the columns at the end of the month to get the total income and expenses by category for the month. Use the totals to create an income statement for the business for the month and to help with the preparation of your tax return.
Tips & Warnings
- If you're creating a manual spreadsheet, use legal-size paper turned lengthwise in order to fit all your expense headers on one page.
- "Keeping the Books: Basic Record Keeping and Accounting for the Successful Small Business;" Linda Pinson; 1996
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