Accounting Basics: The Balance Sheet

 One of the fundamental components (for want of a better word) of accounting is the Balance Sheet. The balance sheet is often referred to as a statement of financial position. It can be described as a snapshot that shows the company's financial position at any given moment. Listed in the balance sheet are the company's assets, liabilities and owners equity.

If you view the balance sheet as a two column worksheet, the assets would be in the left column while the liabilities and owners equity would be in the right column. The two columns must be equal.

You won't be able to determine the company's profitability from the balance sheet. What the balance sheet will show is the solvency of the company. Analysts will look at various ratios (i.e. current ratio: current assets / current liabilities) to determine the company's financial well being.

Future entries in my Accounting Basics series will describe each of the components of the balance sheet.

Accounting Basics: Current Assets - Cash

 Cash is normally the first item listed under Current Assets on the Balance Sheet. What does cash include? Cash includes any deposits available in the bank as well as anything on-hand which might include bills and checks or money orders to be deposited.

Accounting Basics: Management Accounting vs. Financial Accounting

 This 3rd installment in my "Accounting Basics" series will discuss the differences between Management Accounting and Financial Accounting.

The private accounting field can be further divided into two sub-categories depending on how the information generated by the accountant is used.

As its name implies, Management (or Managerial) Accounting provides that information which is used by managers within the company. The information provided can be as broad as long range financial projections or as detailed as analyzing cost variances (ie budget overages). Wikipedia defines management accounting as being " concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions."

While management accounting concerns the internal use of information, Financial Accounting concerns the external use of accounting information. Of course financial accounting concepts are used in management accounting. Financial accounting involves providing information which is useful to external users such as prospective buyers and investors, creditors, government agencies, etc. Financial Statements are the most provided piece of information. These include the Balance Sheet and Income Statement (to be explained in a future post). Wikipedia defines financial accounting as "the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, government agencies, owners, and other stakeholders. Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company."

Budget Planning for Small Business

Every successful business relies on comprehensive budget planning. Planning a budget is an essential process in order to ensure the proper flow of a business.

Before planning for a budget, take into consideration the type of your business, what are all the expected expenses, how frequent they are, how the company will pay for it. These are all the vital measures that you have to look into.

It would always be good enough to use previous budget records as a guideline. In case, if you are a starter of a new business look for the similar business budget models.

You can make use of a spreadsheet program or any computer accounting software for planning your budget. This is not only time consuming but also assist you with the realistic in line business financial plans.

Proper recording and monitoring of budget planned with major financial transactions that occurs inside a company is mandatory for every business. A budget that is not regularly monitored cannot do any good at future financial crisis.

Plan your budget in a right way with the help of an trusted accounting professional and act accordingly.

Business networking commandments

Networking is a major prospecting tool for most of the business people. It establishes the relationship with other business people and the customers. With the business networking you can use to grow your business and the revenue. Business networking is all about building relationships, finding the people having common ideology.
Business networking helps you to meet the people and get to know about them in determining whether they are good referral partners or clients. You spend most of your time and effort on people who can help each other in your business. When the process is done properly it can truly make a difference in building a wealth of resources and the amount of business your company generates in a successful manner. If it is done incorrectly, it would actually harm your business.
In order to gain the most out of business networking, use the following commandments:
1. Always have the business networking tools with you all times, like business cards, brochures, pamphlets that tell about your business, an informative name badge and a pocket-sized business card file containing cards of other professionals whom you can refer.
2. Identify your goal to meet the number of people, as people have to trust you before they will do business with you and make sure you get all their cards. It’s an important aspect to get the business card of everyone whom you meet. This sets the stage for networking to happen. Write notes on the backs of business cards that you collect, it might be useful in remembering a person more clearly. Don’t give your business card to everyone you meet. Rather, give it to anyone who asks you for it.
3. Be a host to do things for others and help to greet people, since a guest sits back and relaxes. If you see visitors sitting, introduce yourself and ask if they would like to meet others.
4. Pay attention to the events and conversations, so that you’ll be able to learn a lot about the people in your network. Be specific and brief, before you are to say something in your discussion and make sure how you want others to know you.
5. Always try not to close a deal as networking is about developing relationships with other professionals. Meeting people at events should be the beginning of that process, not the end of it.
6. Be prepared to give the list of referrals whenever possible. If you are unable to give someone a bona fide referral, try to offer some other information that might be of interest to them (about the incoming event). Have a specific list of referral needs. The more specific you are about, then you would be able to receive more referrals.

7. Time management is an essential factor to be considered. When you delay in sending a message to your fellow groups, indirectly you specify them that you only care about yourself and you don’t take the time to learn about their needs. Be careful in spending too much of time with any one person, as your goal is to meet a given number of people. Always try to have direct contact with that person, so that he would gain confidence on your small business.
Follow the above commandments effectively to develop relationships with people who we can help and who can help us. Also be sure to fulfill any promises which you have made. Make most of your time to spend on business networking.