| Many small business owners wonder if accounting | | | | Some automated accounting systems require |
| is a necessary evil. Those who run the accounting | | | | knowledge about computers and accounting. If |
| system speak a language of credits and debits. | | | | you are thinking about one of these systems, |
| Most business owners feel they can not speak | | | | make sure that the people running it have the |
| this language. An efficient accounting system | | | | ability to install and operate it. It is best to get a |
| contributes to overall profitability. | | | | package that works well with your firms |
| An accounting system is for communication. The | | | | capabilities. Also, the automated package needs to |
| system produces information that tells specific | | | | be able to work on the computer equipment you |
| things about the company. An accounting system | | | | currently have or will be purchasing in the near |
| provides the information to run the company, at | | | | future. |
| the owners fingertips. The system includes | | | | A business cycle is a flow of transactions needed |
| accounts receivable, accounts payable, order | | | | to complete a sale and collect the proceeds. In |
| entry, inventory control, cost accounting, payroll | | | | setting up an accounting system you need to |
| and fixed assets accounting. | | | | know what types of accounting transactions are |
| The general ledger shows transactions in four | | | | involved and what entries are to be made along |
| different categories. These categories include the | | | | the way. Most company cycles follow these |
| account assets, liabilities, income and expenses. | | | | steps, purchase raw materials, enter them into |
| Entries are posted to each and summarized. The | | | | the inventory, begin the manufacturing process, |
| summary is then sent to the general ledger for | | | | enter goods in the process inventory, pay |
| posting. | | | | suppliers and employees, complete the |
| It is best to organize your business accounting | | | | manufacturing process, enter goods into the |
| system by function. From an internal control, it is | | | | finished goods inventory, sell the inventory and |
| best not to have one person do all the functions. | | | | collect payments. |
| Fraud and embezzlement are possible if too few | | | | When purchasing an accounting system you need |
| people are doing all the accounting. An internal | | | | to figure who is going to do what in the system. |
| control structure helps mitigate risks through | | | | It is best to assign the person who is most |
| mechanics and procedures. | | | | familiar with the system to be in charge of it. If |
| The type of information needed from an | | | | you are just starting a business you will need to |
| accounting system should be accurate, fulfill | | | | know the background of your new employees. At |
| managements needs and be easy to use. As well | | | | least one of them should be able to run the |
| as accuracy, relevancy and simplicity an | | | | system. You might want to consider having them |
| accounting system should be set up so that it | | | | interview with an accounting expert, check their |
| does not require an inordinate amount of time to | | | | references from past jobs and ask them |
| maintain. The accounting system should be easy | | | | accounting questions. It is your company and you |
| enough to understand so that a CPA is not | | | | need to do everything possible to protect it. |
| required to operate it or interpret its output. | | | | |