How to Use Financial Accounting
Accounting is a process by which you or a certified accountant measures and documents an organization's financial records and statements. An organization of any size, including a small business or multinational corporation can and should keep track of its financial records. There are a number of way accounting practices can benefit your organization.
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Instructions
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Adopt the accrued method of accounting versus the cash method. Track revenue and expenses on either an accrual basis or a cash basis. According to Quick MBA, the accrual method acknowledges when revenue and expenses are earned and incurred, whereas the cash method only recognizes when money is received and paid out.
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Track your business' financial performance using an income statement. Track your business' income and profits over a specific period of time, such as a quarter or fiscal year, after losses. Solid accounting records can identify profits from any previous quarter or year.
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Obtain a snapshot of your business. Compare your assets (current and fixed) and liabilities (current and long-term). The result is the amount of equity--assets less liabilities--that your business owns. This accounting information is expressed in the form of a balance sheet.
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Monitor cash flows. Organize and report cash generated from operating activities (see your income statement for figures), investing and financing activities (see your liabilities figures) and supplemental information (which does not involve cash, but can include income taxes).
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Review all your financial reports regularly. If your books show a high number of deficit--meaning your expenses are greater than your income and profits--your organization may be in danger.
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References
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