Restaurant Accounting Method
Like other businesses, if you own a restaurant, you can choose between the cash and accrual methods of accounting for your business. Typically, if your business is small, the cash method is more manageable. Larger businesses might be more interested in the accrual method. A professional accountant can analyze your needs and advise you on which system will work best for you as you start out.
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Cash Method
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If your restaurant doesn't have an inventory, this is the accounting method for you. Any income your restaurant receives is reported the same year it's received, and all expenses are deducted on your tax returns for the years in which they're paid. It's simple and straightforward, similar to balancing your checkbook.
Accrual Method
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If your restaurant has an inventory, this method might be more appealing to you. In the accrual method of accounting, every transaction you make is reported at the time it's made -- regardless of whether or not you pay or receive payment at that time. For example, if you purchase equipment in December but don't actually pay for it until January, you would still report that on the previous year's tax return. Likewise, if you allow a long-time customer to run a tab with you, you would report the amount she owes you at the end of December on your tax return -- even if that customer hasn't paid you yet.
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Methods of Recording
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Like your personal finances, you can use either a manual accounting method or computer software to keep track of your restaurant's accounts. Cash-basis accounting lends itself well to manual recording, which uses a big ledger that functions like an oversized checkbook. If your accounting needs are more complex, you may want to invest in a computer software system -- particularly if you want to hook it up to your restaurant's computerized point-of-sale system. POS systems act like cash registers with brains, and keep track of your daily receipts as they happen.
Considerations
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CPA Ronald L. Noll, an accountant who specializes in restaurants, advises you to consult an accounting professional when establishing your restaurant's accounting method. Additionally, if you find an accountant you trust, using the same computerized system your accountant uses can help your accountant manage your restaurant's needs. Some systems allow remote access, so your accountant can access and analyze your restaurant's files from her office on a regular schedule.
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References
Resources
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