First it is good know a few accounting principles and concepts.
One is called the "Objectivity Principle". This means you should base all your business transactions on solid evidence such as contracts, invoices, sales and expense receipts. Never do business on just word of mouth alone.
Another is called the "Business Entity" concept. This means to keep business expenses separate from your personal expenses. For example if you take your family bowling, don't include include the expense in your business expense.
"Revenue Recognition" is another. With this principle, you recognize and recorded your business revenue in the month you earned it, even if your customers don't pay you cash in the same month you earned it.
There is also the "Matching Principle". With this principle you recognized your business expense in the month you incurred it, even if you don't you don't pay it in the same month you still record it.
There are basically just a few kind of businesses. There are service oriented businesses where you provide some type of service to your customers. There are also merchandising, warehousing or inventory type business where you sell a physical product like say shoes to your customers.
Another major type of business is manufacture or construction type businesses where you take some type of raw material and make a finished product for your customer, like bricks for example.
A few ownership type structure exists. In a single proprietor structure, one person owns 100 percent of the business. That means he is also responsible for 100 percent of all liabilities.
A partnership is also another major structure arrangement. In this structure, as part of the start up procedure they should draw up a partnership contract agreement which they both sign. This shows the terms of agreement such as that they share profits and loss at 50 percent each.
Next, what is needed is to set up what are called "General Ledger" accounts. Commercial accounting software such as "Simply Accounting" shows you how to do this. Finally, all your business transactions are recorded in these accounts. Then your program give all your financial statements such as Income Statements and Balance Sheets. From these financial reports you see how your business is doing and thus manage it accordingly.
A prime concern you have as business owner is, is your business making a net profit each month? This happens when your income for the month is more than your expenses. This is the result you want to have at the end of each month.
One is called the "Objectivity Principle". This means you should base all your business transactions on solid evidence such as contracts, invoices, sales and expense receipts. Never do business on just word of mouth alone.
Another is called the "Business Entity" concept. This means to keep business expenses separate from your personal expenses. For example if you take your family bowling, don't include include the expense in your business expense.
"Revenue Recognition" is another. With this principle, you recognize and recorded your business revenue in the month you earned it, even if your customers don't pay you cash in the same month you earned it.
There is also the "Matching Principle". With this principle you recognized your business expense in the month you incurred it, even if you don't you don't pay it in the same month you still record it.
There are basically just a few kind of businesses. There are service oriented businesses where you provide some type of service to your customers. There are also merchandising, warehousing or inventory type business where you sell a physical product like say shoes to your customers.
Another major type of business is manufacture or construction type businesses where you take some type of raw material and make a finished product for your customer, like bricks for example.
A few ownership type structure exists. In a single proprietor structure, one person owns 100 percent of the business. That means he is also responsible for 100 percent of all liabilities.
A partnership is also another major structure arrangement. In this structure, as part of the start up procedure they should draw up a partnership contract agreement which they both sign. This shows the terms of agreement such as that they share profits and loss at 50 percent each.
Next, what is needed is to set up what are called "General Ledger" accounts. Commercial accounting software such as "Simply Accounting" shows you how to do this. Finally, all your business transactions are recorded in these accounts. Then your program give all your financial statements such as Income Statements and Balance Sheets. From these financial reports you see how your business is doing and thus manage it accordingly.
A prime concern you have as business owner is, is your business making a net profit each month? This happens when your income for the month is more than your expenses. This is the result you want to have at the end of each month.
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