Basic Accounting Principles That Business Owners Should Be Aware Of

Accounting principles are the rules and guidelines which companies need to follow while reporting financial data. Business owners may not be able to handle their accounting because it’s easy to miscalculate the expenses and taxes owed. As a firm that offers Edmonton bookkeeping services, we find that accounting your business financial transactions is vital because:

1) Know your Company's Financial Health

You need to be aware of the expenses, returns, and profits of your company. It’s a crucial information required to make key business decisions.

2) Be Tax Compliant

The Canadian Revenue Agency requires you to pay your taxes. Failing to do so, or missing out on certain tax requirements will have consequences.


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Small Business Accounting Edmonton: The Audit Preparation Checklist

Running a business and maintaining your financial accounts on a regular basis can be a difficult task. Doing your own accounting has its own pros and cons. With too many responsibilities in your hands, mistakes are bound to happen. Such mistakes create a problem for you during an annual audit. Here is an audit preparation checklist you should keep in mind when there’s an audit for your small business accounting Edmonton.

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The Basic Steps Of Capital Budgeting

Capital budgeting is a multi-step process that is used to determine if a particular business project or plan is worth the investing. It is a long-term planning for financing of a proposed project such as purchase of a new machinery or equipment, investing in new products or projects, etc. Capital budgeting projects are categorized as follows:

1. Replacement Projects for Maintaining Business - Projects for the maintenance and functioning of the existing business operations.
2. Replacement Projects for Reducing Cost - Projects for replacing equipment, products, services, or functioning that may require lesser resources and funds.

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What Are The Objectives Of Accounting

Accounting allows you to keep a record of all the financial transactions of a business. Each and every expense incurred by the firm and the income received is recorded in a timely manner with the help of accounting. Accounting is a must for all types of businesses irrespective of their size and niche. The objectives of accounting are explained as follows.

Systematic Record of Statements

The most basic objective of accounting is to maintain all the transaction data that includes all the inflow of money and the various expenses incurred by your business on a day-to-day basis. Maintaining these records manually is a tough job and can lead to several miscalculations. Plus, you may miss out on certain transactions if they are not maintained properly. Thus, accounting saves a lot of time and efforts and ensures that there are no errors in your accounting statements.

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Difference Between Assets And Liabilities

 

Do you find it difficult to formulate your balance sheet? Do you get confused between what are assets and liabilities? Is it that you always tend to classify your assets and liabilities in the wrong manner? Although assets and liabilities seem easy to classify, they can be quite confusing once you actually start recording them in your books of account. This article will help you in classifying your assets and liabilities and so, you will be able to manage your balance sheet in a much more efficient way. Listed below are the differences between assets and liabilities.

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How Is Inventory Management Beneficial For Your Business

Inventory management is important for a business in order to maintain a good cash flow. The practice of looking after and controlling the orders, storing and delivering the goods is known as inventory management. If you do not have an inventory management system, it may lead to overstocking or understocking. Also, you may end up having a low cash flow. The importance of inventory control system cannot be ignored and so, here are a few reasons why inventory control system is beneficial for your business.

Improves the Accuracy of Inventory Orders

Maintaining a proper inventory system will help you know how much stock is available in your warehouse. You will have an accurate knowledge of the items in your inventory. Once you know how much inventory is stored in the warehouse, you can send the required number of inventory to the retail store as and when you receive the order. This will help you have a stable count for the stocks in the retail store and your warehouse will have sufficient stocks to cater to the orders.

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What Is The Difference Between Financial And Cost Accounting

Financial and cost accounting are a part of the company’s operations. Both help the company control its finances and formulate strategic organization policies. An overall picture of profit and loss is provided by financial accounting, while cost accounting provides a detailed analysis of a product’s cost.

Meaning

Financial accounting keeps track of a company’s financial transactions for a given period of time which is usually for a year. Financial transactions are recorded using a standardized format and following certain guidelines and is presented in the form of income statement or balance sheet.

Cost accounting is a system of recording all the costs incurred in a business. It includes the cost of used to calculate each overhead product-wise, such as materials, labor, direct and indirect expenses, etc.


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What Is The Importance Of Accounting Ratios

Every business can determine its profitability and efficiency based on the financial statements. Although profitability can be easily identified on financial statements, the efficiency of the organization can be understood with the help of accounting ratios.Therefore, businesses cannot neglect the importance of ratio analysis. The comparison or relationship between one accounting data-point and another helps in determining the financial condition of the company. Ratio analysis is done to compare how the company is performing with others in the industry and also to determine a company’s current performance with respect to previous years. Here are a few more reasons why accounting ratios are important.

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5 Common Errors Businesses Make on Financial Statements

Having a record of your daily transactions is essential for your business. However, maintaining your financial records is not an easy task. You can do it yourself but there are chances of making certain mistakes which may cost your business. We have listed some common errors that entrepreneurs make while maintaining their financial accounts. The effects of errors on financial statement can be costly and hence, every businessman should be aware of the common errors that are made on financial statements.


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