A non-governmental body called the Financial Accounting Standards Board sets the GAAP. While there are no laws enforcing these standards, most lenders and business partners in the United States will require that you adhere to GAAP. Cash vs. Accrual Cash vs. Accrual You can do your business accounting on a cash or accrual basis. The difference between the two comes down to timing. Cash basis is the most basic accounting. On a cash basis, you only record transactions when money changes hands. If you receive an invoice on the 10th but don’t pay it until the 15th, the transaction is recorded on the 15th. With accrual basis, you record transactions twice: when they occur and when they’re paid. For the invoice above, you record the expense on the 10th and the payment on the 15th as two separate transactions. The method you use depends on what you need from your business finances. Cash basis is simpler and easier to stay on top of, while accrual offers greater insights for more detail-oriented business owners. Most small businesses have more basic accounting needs, which means cash basis is often the right fit. Every year, your company will generate financial statements that people outside of your company—people like investors, lenders, government agencies, auditors, potential buyers, etc.—can use to learn more about your business’s financial health and profitability. Preparing the company’s annual financial statements this way is called financial accounting. Managerial accounting Managerial accounting (or management accounting) is similar to financial accounting, with two important exceptions: - 1.The statements produced by managerial accounting are for internal use only.
- 2.They’re generated much more frequently—often on a quarterly or monthly basis.
If your business ever grows to the point where you need to hire an accountant full-time, most of their time will be taken up by managerial accounting. You’ll be paying them to produce reports that provide regular updates on the company’s financial health and help you interpret those reports.
Do'stlaringiz bilan baham: |
