Setting up accounting records for a new small business is an important task that will help the business owner keep track of their finances and make informed decisions. Here are the essential steps to take:

1. Choose an accounting method: The first step in setting up accounting records is to choose an accounting method. There are two main options: cash basis and accrual basis. Under the cash basis, revenue is recorded when cash is received and expenses are recorded when they are paid. Under the accrual basis, revenue is recorded when it is earned and expenses are recorded when they are incurred, regardless of when payment is received or made.
2. Choose an accounting software: There are various accounting software options available, both online and offline. Some popular choices include QuickBooks, Xero, and Wave. It is important to choose a software that is easy to use and meets the needs of the business.
3. Set up a chart of accounts: A chart of accounts is a list of all the categories that a business uses to classify its financial transactions. These categories may include assets, liabilities, equity, revenue, and expenses. Setting up a chart of accounts helps to organize financial transactions and makes it easier to prepare financial statements.
4. Record transactions: Once the chart of accounts is set up, the business owner can start recording financial transactions. This may include things like sales, purchases, payroll, and expenses. It is important to keep accurate and up-to-date records in order to have a clear picture of the business’s financial health.
5. Prepare financial statements: Financial statements are reports that summarize a business’s financial position. The three main financial statements are the balance sheet, the income statement, and the statement of cash flows. The balance sheet shows the business’s assets, liabilities, and equity at a specific point in time. The income statement shows the business’s revenues and expenses over a specific period of time. The statement of cash flows shows the business’s inflows and outflows of cash over a specific period of time.
6. Keep track of tax obligations: In addition to tracking financial transactions, it is important for a small business to keep track of its tax obligations. This may include things like sales tax, payroll tax, and income tax. Failing to pay taxes on time can result in penalties and interest charges.

In conclusion, setting up accounting records for a small business involves choosing an accounting method and software, setting up a chart of accounts, recording financial transactions, preparing financial statements, and keeping track of tax obligations. Doing so will help the business owner make informed decisions and stay on top of their finances. Contact Dire Wolf Consulting today to request help setting up your accounting records!