How to Master Your Business Accounting Without an Accounting Degree

The opinions expressed by entrepreneurs contributors are their own.

is the basis of any small insight. If you run a small business, you need to make it a habit. Too often, accounting is pushed aside by small business owners to tackle the most pressing issue of the moment. If not, it's procrastination or number phobia (fear of making a mistake).

Believe me, don't put it aside. Far too many small business owners often let a backlog of transactions and expenses build up before they arrange them, which can hurt your business in at least two important ways.

First of all, it's confusing. Up-to-date accounting tells you the essentials you need to know. Without it, you'll only have a rough idea of ​​how much money you have, any outstanding bills you need to pay, and whether you've been paid for the goods or services you provide.

Second, ignoring the bookkeeping makes paying your taxes more complicated. There are few things worse than having a deadline and having to sort through a paper bag full of receipts for items you can deduct - at the same time you're trying to meet a deadline for a client. Hiring an accountant or tax preparer isn't cheap either.

Here's the good news: you don't need a degree to understand and benefit from accounting. Double-entry bookkeeping, as practiced today, dates back to the 15th century. If you've ever made a checklist of the items needed to complete a task and then marked the items as they were gathered or completed, you have the basics of bookkeeping.

Related: Finding the Right Solution for Your Accounting Needs

Accounting 101

When you're ready to take on your own accountancy, here's the syllabus for your non-degree course:

Accounts. Accounts group together similar business activities for ease of analysis (i.e. a sales account). The complete list of your accounts is called your chart of accounts. Items on this list include sales, cost of goods sold, salaries - any business activity you perform. Accounting Period: This is the specific period in which you are looking at your business. For example, you might want to know how you did in February. Or the third trimester. Or the year. Or since you started advertising. Accounts Payable: This is money you currently owe to vendors or suppliers, but haven't paid yet. If you bought a computer that you haven't paid for yet, it's an account payable. Accounts Receivable: You did the work and sent the invoice, but the customer's check is in the mail. It is an account receivable. Accruals: Expenses you've incurred but haven't yet paid (meaning accounts payable and accounts receivable are accrued expenses). If you use accrual accounting, you record accrued liabilities (positive and negative) at the time of sale. In cash accounting, you would have recorded when you paid or received the money. The benefit of accrual accounting is that it lets you know that even if you have cash on hand, you shouldn't spend it freely. You may need for that shipment of raw materials you just received. Conversely, you may have worked all month for a client but haven't yet been paid for that work. Assets: Things you own, physical or intangible. These can be things like property, vehicles, money, a computer, or the right to use a particular parking spot. Balance Sheet: This document summarizes all of your assets (what you own) and compares them to all of your equity and liabilities (what you owe). With it, you can assess the overall financial health of your organization. Cash Flow: A comparison between the money you usually receive and the money you have to pay. Cost of Goods Sold (COGS): If you manufacture a product, the sum of the costs is directly related to the manufacture of that product. So if you're a bakery, it would be materials like flour, sugar, and eggs, and the cost of using the kitchen you're cooking in. After subtracting your cost of goods sold from your net sales (that is, your total sales revenue less any sales discounts, allowances, or returns), you get your gross profit. Double-entry accounting: By recording each entry as a credit and a debit, you see where your money is coming from and where you are spending it. This facilitates the detection of errors. Credit money when you buy a good; debit an asset account (e.g. "IT expenses") when you spend money on that asset. When y...