What you’ll learn

• Business Accounting and Accounting Key Terms
• Understanding Financial Statements
• Bookkeeping and Record Keeping
• Cash Flow Management
• Accounting Software to simplify your tasks

Lesson #1: What is Business Accounting?

Business accounting is the process of gathering and analysing financial information on business activity, recording transactions, and producing financial statements.

Business accounting is important for a variety of reasons. Keeping tabs on all of your assets, liabilities, inventory, and other records can help you secure investors, protect your assets from theft, and find ways to grow your company and take it to the next level. Primary duties of small business accounting include bookkeeping, preparing and filing tax returns, and drafting financial reports.

Through business accounting, you can better manage your finances to make informed financial decisions for your company. Many small business owners take on accounting themselves in the early stages to save money. If you’re in the same boat, it’s essential you have a firm grasp on business accounting basics.

As a small business owner, you need to understand a few key accounting basics to ensure your company operates smoothly. Below, we’ll cover several accounting terms and principles you should have a firm grasp on. For a complete list, refer to our full lists of accounting terms and accounting principles below.

• Accrual basis accounting method: Accounting method in which a company recognises expenses and revenues at the time of a sale
• Cash basis accounting method: Accounting method in which a company recognises expenses and revenues when a payment is received
• Accounts receivable: Money owed by customers for a product or service they purchased
• Income statement: Financial document that summarises a business’s income, expenses, and total cost during a specific period to determine the profit or losses during this period
• Cash flow statement: Financial document that shows the money coming in and going out of your business accounts
• Generally accepted accounting principles (GAAP): A global standard for financial reporting with a wide array of principles, such as how to recognise expenses, assets, liabilities, and revenue; how to measure and report profits and losses; and how to present information on financial statements