Simple Accounting for Small Business – Accounting with a Simple Spreadsheet Template
Starting a small business from home, offering products or services like business consulting, photography, selling on the web, or MLM? Now you are faced with keeping track of all your expenses and income for your business and you certainly don’t have the money yet to hire an accountant or bookkeeper. If your business is a sole proprietorship, be it Canadian property or US-based property, you don’t need an accountant to send your business finances (books) to the IRS (US) or Revenue. Canada). Your business income and losses are reported as part of your annual personal income tax. For this small business start-up, you won’t need to buy fancy accounting software, like Quick Books or AccPac, to keep track of your business.
Only as part of the incorporation of Bizfare Enterprise Inc in 2005 was a requirement to hire an accountant. My accountant insisted on using Quick Books software for my business accounting. Until then, using a simple spreadsheet template served my business accounting needs for over ten years. This simple accounting spreadsheet passed the test of several audits conducted by Revenue Canada (CRA and Revenue Canada Goods and Services Tax). Revenue Canada accepted both the printed spreadsheet and the electronic version of my financial books. (By the way, the audits revealed more ways for you to claim additional taxes during the previous three years. That’s my kind of audit!)
In your new start-up business, you are likely to generate 10-30 accounting transactions per month. These transactions would be items such as expenses, income (sales), liability type transactions (loan), and sales tax collection / deductions (federal + state / provincial). These transactions are further broken down into various business accounts. All the accounts that you set up for your company are called Chart of accounts. The recording of your business financial transactions (journal entries) can be executed in pen and ink in an accounting column notebook or electronically with your computer using a spreadsheet program (MS Excel, Open Office, Star Office).
Whether you use electronic or print media, you should develop a simple journal template to create your Synoptic business magazine. This Synoptic journal The format has the advantage of allowing you a comprehensive view of all your individual journal entry transactions against all of your business accounts. Creating this Synoptic Journal is easier than you think and requires no prior accounting or bookkeeping knowledge.
TIP # 1: You could further reduce accounting items (journal entries) by consolidating similar items as ‘all sales of the month’ Y ‘all parking receipts for the month’ on a totalized order line for the month.
Where do you start to identify the various business accounts required for your synoptic journal?
If you currently work for a business or government, make sure you have one of your employee expense forms. Look at each of the areas identified as expenses: meals, mileage, hotel accommodations, taxi, car rental, phone and cell phone, airfare, office supplies, etc. This is an excellent place to identify the various businesses Expense accounts you need to set up your company ledgers. To complete your business chart of accounts, include a business bank account, sales, COGS (cost of goods sold), sales tax collection, marketing expenses, and others as needed. Each of these Accounts will appear as a title at the top of each column in your Synoptic Journal. Each row (line item) will be the individual journal transactions that you enter. Journal transactions are grouped and summarized for each business month; generally from January to December.
So your Synoptic Journal would look like this example from Synoptic Journal at http://picasaweb.google.com/carl.chesal/BookkeepingTemplate.
The column headings can be in this order (from left to right):
DATE | DESCRIPTION | BANK DEPOSITS | BANK WITHDRAWALS | INCOME FROM SALES | COGS | SALES TAX COLLECTED AND REFERRED | OFFICE SUPPLIES EXPENSES | EXPENDITURE # 2 | EXPENDITURE # 3 | ETC
TIP # 2: Unless your business is incorporated or an LLC, you don’t need to go through the expense of opening a business account with your bank. Business accounts generally charge a higher monthly fee, charge to print checks (checks), and offer no interest on your monthly account balance. Instead, open a separate personal bank account (maybe savings). This will show the ‘tax collector’ that he keeps the business separate from his personal banking. Remember that you are a sole proprietor and all income (and losses) from your business should be applied directly to your personal income tax filing (according to the IRS and CRA).
To save you time and make it very simple, I have already created a simple Synoptic Journal spreadsheet template that performs all the calculations for each month and accumulates the 12 business months so that it can easily be included in your annual tax preparation on the personal income. This Synoptic Journal template has debit / credit checks and balances, tracks sales tax, mileage, and totals for each account throughout the fiscal year. If you want this FREE accounting template, you can get it from Communicate Innovate. With a few keystrokes, to help you identify yourself, I will gladly send you this FREE Synoptic Journal Template and also any Small Business Tips in the future.
TIP # 3: An Accounting Rule is that every time you post a journal entry (line item that applies the transaction against the appropriate business accounts) the debits and credits MUST REMAIN THE SAME at ALL times. This debit equals credit calculator is built into this FREE accounting template. When you have finished entering a line item (journal transaction), verify that the amount in the Debit cell equals the amount in the Credit cell. If they are not the same, you have not entered the amounts correctly in your journal transaction. Correct the problem before entering your next journal entry.
You are now equipped to capture your company’s financial books with simple accounting software. Happy accounting! And happy sale!