Bookkeeping for Small Businesses in Framingham
Bookkeeping is an integral part of small business operations and can often be outsourced. Bookkeeping involves recording the financial dealings and any other transactions of a company in a ledger, which may also be called a book. Bookkeepers prepare financial statements, payroll records and prepare taxes for the company. Bookkeepers may also handle billing and collections, cash management, accounts receivable and payable as well as data entry.
The three main financial statements are the balance sheet, income statement, and cash flow statement. The balance sheet displays a company’s assets (what it owns), liabilities (what it owes), and equity (the difference between the two). Income is how much money a company brings in from sales and other sources of revenue. Cash flow is how much money flows in and out of a business over time. The three main financial statements are the balance sheet, income statement, and cash flow statement. The balance sheet displays a company’s assets (what it owns), liabilities (what it owes), and equity (the difference between the two). Income is how much money a company brings in from sales or other sources of revenue such as interest or dividends earned on investments held by the corporation. Cash flow is how much money flows into or out of a business over time.
Profit and Loss Statement
Bookkeeping for a small business involves preparation of a profit and loss statement (P&L) is a financial statement that summarizes the revenue, costs, and resulting profits or losses of a company over a specific time period. A P&L typically includes the following information: Gross Profit - total gross sales minus the cost of goods sold. Operating Income - gross profit minus other operating expenses. Net Income - operating income less interest expense and taxes. Earnings per Share- net income divided by the number of common shares outstanding.
Bookkeeping for a small business involves preaparation of a balance sheet is an itemized list that summarizes a company’s assets, liabilities, and net worth. Assets are everything a company owns of value while liabilities are what the company owes and net worth is the difference between assets and liabilities. The balance sheet’s purpose is to help see how well a company is doing financially by showing what it has (i.e., its assets) versus what it owes (i.e., its liabilities). The balance sheet has three main sections: assets, equity, and debt or other claims on equity. The first section lists all of the financial resources available to the business such as cash in bank accounts, cash in hand or inventory for sale; capital invested by shareholders; buildings owned by the business; equipment owned by businesses; patents owned by businesses; stocks or bonds issued by corporations with which they have invested in those corporations through shareholding etc.; any other property owned that might have some value to someone else who could buy it (also known as goodwill); etcetera. The second section lists all of the debts owed to creditors such as unpaid invoices from suppliers for raw goods purchased previously but not yet paid for in full as well as unpaid interest on loans taken out from banks, overdue mortgage payments.
Cash Flow Statement
Bookkeeping for a small business involves preaparation of a cash flow statement is used to review the cash coming into and going out of a business. It provides a measure of liquidity or solvency and is useful in making decisions on capital expenditures. The three main segments are operations, investing, and financing. Operations includes cash generated in the course of doing business including sales to customers, accounts receivable collections, change in inventory (inventory purchases) and change in accounts payable (payments made to vendors). Investing covers major investments such as fixed assets purchases (buying equipment), construction projects, acquisitions or divestitures and other investments such as bank holdings. Financing includes any sources of financing that come into the company including debt issues, equity issues like stock offerings or share repurchases. The last line on the statement shows excess cash during year-end; this is important information for companies with a large amount of long term debt because it will show if they are generating enough free cash flow to meet future obligations (e.g., interest payments).
Bookkeeping can allso prepare payroll records for a small business. The purpose of payroll records is to provide a financial audit trail, which can be used by the company’s management team to evaluate the performance and productivity of an employee. The typical form for payroll records includes information about how much money was owed to the employee, how much was withheld for taxes, and the amount that was paid in cash. The information is then transferred from this form into a record called a paycheck stub which is given to each regular employee who works at least one day per week.
Small businesses are often not aware of the miscellaneous expenses they incur. For example, many underestimate their fuel and vehicle use, or do not know that they need to pay self-employment taxes. Small businesses are responsible for paying their own taxes in addition to corporate income tax. Income from a small business is subject to both a corporate income tax and individual self-employment tax (SE) and medicare contribution. The Bookkeeper should create strategies for small businesses to better understand how much money must be set aside for taxes each year so that it can budget accordingly.
Electronic bookkeeping systems are often used in accounting for taxation purposes. This type of system is usually integrated with the accounting system to create a seamless process and to make it easier on the accountant. These systems have been designed specially to keep track of all tax related information, including taxes paid or due, tax-related expense allocations, and other details that would otherwise be difficult for an accountant to keep track of. A wide variety of companies use this type of software, from multinational corporations all the way down to local businesses and individuals. Smaller businesses may not need these software packages but more complicated ones can find that they are indispensable, especially if they do a lot of work with international clients who may not be familiar with US tax law. For individual taxpayers on the other hand it's much more useful because you can calculate your potential refund or bill at any time during the year depending on what's happened in your life such as getting married or having children. Companies who use electronic bookkeeping also often find that they enjoy lower overhead costs because their employees spend less time tracking down information as well as reducing errors in calculating payroll taxes because everything is automatically calculated based on hours worked by employees and wages earned per hour.
Bookkeeping includes tracking invoices and payments on behalf of customers or clients; preparing all records pertaining to debts owed by the company to outside creditors; daily monitoring of incoming funds; preparation of account reconciliations using checkbook registers; maintenance of general ledgers, journals and subsidiary ledgers; preparation of periodic reports such as profit-and-loss statements, balance sheets or other financial reports required by law or custom.