Accounting allows you to write down all the operations of your business.
Accounting is the procedure for recording transactions that are relevant to an economic activity as revenue or expenditure.
Usually this annotation is handled in double game i.e. using two columns (give and have) to account for the double effects of each transaction.
Both columns must always show the same amount so that the balance sheet is balanced.
The concept of giving and having can be difficult and not very intuitive and for this reason we recommend that you read our guide to simplify the mechanism of the T-accounts.
There are essentially two types of accounting that companies can adopt
Ordinary accounting requires the recording of several records and is required by law for activities that sell products for revenues above $ 700,000 or $ 400,000 if it is services.
However, this regime can also be chosen by companies that would naturally fall under the simplified one with a conclusive behavior or by presenting all the registers required by the legislation for this regime.
Who has to keep regular accounts?
Are required to keep ordinary accounts:
limited liability companies
Joint Stock Companies
Joint Stock Companies
mutual insurance companies
non-recognised consortia, insurance and organisations
The accounting books to be kept are:
the journal book that collects all transactions in chronological order for a given period of time
VAT records, purchases, invoices issued and fees
the book of assets in which to record the long-term resources available to the company and which are subject to depreciation, depreciation, valuation and devaluation.
The inventory book that includes the list of products divided by type.
Who falls under simplified accounting?
Simplified accounting may be adopted by:
with revenues of less than $ 400,000 for services and $ 700,000 for products.
Other categories of activities may also opt for this scheme for which simplified accounting is not required by the civil code but the volume of earnings is below the above thresholds.
In the event that one subject carries out several activities at the same time the decision is made on the prevailing activity.
What are the records to keep in simplified accounting?
The records from documents to keep up to date are:
auxiliary entries showing the income and outputs that determine the income
auxiliary warehouse records documenting flows of goods, raw materials and ancillary materials
register of depreciable assets
Importance of accounting
Regardless of which regime you choose, accounting plays a key role in the management of your business as it allows you to have control over your economic situation.
You can also make informed decisions based on past data and analyze the performance of your business and determine, for example, whether you have the financial power to make a strategic move or if failure could cause you a financial breakdown.
You can also get information about the nature of the capital with which you support your operations: is it income from the use of resources, sales or do you have to use the capital of third parties by increasing your percentage of debt?
What are your most recurring purchases and the most substantial expenses?
A billing program, you can record your purchases and attach related documentation whether you are connected from your computer or are around via the mobile application.
You can also mark purchases as fixed assets so that they are included in the balance sheet and the corresponding depreciation table over the useful life is generated.
Starting with invoices, purchases, and other revenue recorded in the program, the VAT report, balance sheet, and sales and purchases report are automatically completed and updated.
In addition, you can cooperate with your aspecialist by providing them with access to view and consult your data from a specific account for accounting viewing.
Find out how to become an accountant.