| If you are a business owner or an individual who | | | | prefer the accrual method. |
| deals with the keeping of financial record, it is | | | | However, regardless of the method of accounting |
| important that you follow the basic principles of | | | | taken up by a company, it is absolutely important |
| accounting. This is very important since without | | | | that the company has an accounting information |
| these basic principles, your business will be a | | | | system in hand. However, it may seem difficult |
| failure. These principles are called GAAP which is | | | | for the small companies to set up such a system. |
| the acronym of the Generally Accepted | | | | But, once you invest here, it is sure to provide |
| Accounting Principles. However, you should also | | | | you with more accuracy and functionality. |
| consider the appropriate guide lines for accounting | | | | Basically, the work of the accountant is to record |
| to win the trust of the companies. | | | | and analyze the financial transactions of the |
| Basically, there are two different bases on which | | | | company. To that end, he performs the following |
| the most of the business accounts are developed | | | | task. First of all, he jots down all the transactions |
| – the accrual basis and the cash basis. In the | | | | in a particular book. Then, these transactions are |
| accrual basis procedure, the transaction is tracked | | | | analyzed and published in the ledger. Once this is |
| according to the credit owed to the company and | | | | done, the transactions are summarized and |
| owed by the company. This is done regardless of | | | | published as financial statement. |
| the cash payment. On the other hand, the cash | | | | There are two different types of financial |
| basis accounting puts particular importance on the | | | | statements – the balance sheet and the profit |
| cash transaction such as the transfer of cash. | | | | and loss account. The former is the list of the |
| Here, the expenses are recorded only after the | | | | liabilities and assets owned by the company at |
| actual payment is made. | | | | that particular period of time. On the other hand, |
| In most of the cases, the small companies follow | | | | the profit and loss account deals with all the |
| accounting on the cash basis. This is largely | | | | expenditure and profits made by the company at |
| because the number of transactions is limited here | | | | the given period. The financial statements are |
| and they can be recorded easily. At the same | | | | extremely important for the employees and |
| time, the owners of the small business can evade | | | | owners of the company. Third parties like the |
| the tax by manipulating their revenues by | | | | government, and public too, have a lot of interest |
| recording the cash as received in the next | | | | in them. |
| financial year. However, the large companies do | | | | The accountant is important since he is the |
| not have this facility since the amount of | | | | person who delivers all the information. At the |
| transaction is large. Also, they have the fear of | | | | same time, an experienced accountant will give |
| losing their reputation in the public and | | | | you vital advices when it comes to purchasing an |
| shareholders. This is why the large companies | | | | existing business. |