Understanding accounting is a very useful skill to have when it comes to managing a small business. The better a manager understands financial data, the easier it is for them to make a decision. In this post, we will discuss some basic accounting terms as well as accounting methods that are relevant to small businesses.
In accounting, T-accounts are used to track economic activity within the business. A T-account is an individual record of an increase/decrease in an asset, liability, stockholder’s equity, revenue, or expense. Each T-account consists of three parts: the title of the account, a debit, and a credit. A debit is the left side of the account.
In small business accounting, some concepts can be trickier than simply recording assets, liabilities, and transactions. Some companies receive advances in payments before actual services are performed. In accounting, this is called Unearned Revenue. Unearned revenue must be reported in order for companies to comply with GAAP* principles. When the company receives an advance, it