The Importance of Basic Accounting Knowledge in Business

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After completing my first year of business classes at West Chester University, I realized how important accounting knowledge is for any business major. Regardless of the field of business that you choose to pursue, whether it be marketing, management, economics, or finance, you will need to be able to have at least a basic understanding of accounting. Every business has to deal with observing and understanding source documents, income statements, balance sheets, and statements of retained earnings in order to be successful in today’s business world. Anyone interested in entrepreneurship who is looking to start their own business will have a definite advantage if they can understand financial statements of accounting. The truth is that accounting exists in our every day lives whether you realize it or not, so being educated in the field will do nothing but help you in a future business career.

The process of accounting will almost always begin with source documents. In the past, most of the source documents that CPA’s (Certified Public Accountants), auditors, and other accountants would have to deal with were tangible paper documents such as receipts from a recent purchase at a store. The accountant would then have to transfer these source documents into a journal to start the accounting process. Today, most of the source documents are electronic. When a purchase or sale is made between any two businesses or consumers, it is filed into a computer on an electronic database. This method has made accountant’s jobs far more simplistic, as they can they place the transaction directly into an electronic journal on Microsoft Excel.

The basic accounting equation that anyone who works in business should know, is that Assets= Liabilities + Equity. Assets include accounts such as cash, land, building, equipment, office supplies, inventories, and accounts receivable (money owed to you by a customer). The normal balance for these assets are a debit, which means if you are gaining any of the previous, you debit that amount of money towards that account. For example, if a sale is made in your store and a customer pays fifty dollars cash, then you would debit the cash account for fifty dollars. Liabilities include accounts payable (what you owe others on account), unearned revenue (you have been paid but haven’t performed a service), salaries payable (salary money owed to your employees), taxes payable, and interest payable. The normal balance that increases these accounts is a credit, unless the account is a contra account in which the opposite normal balance applies. Equity accounts include dividends (money owed to your stockholders), revenues and expenses. The normal balance for owner’s equity is a credit, but expenses made by your business are always treated as contra accounts. So for a transaction where a customer purchases something from your store on on account, you would debit accounts receivable and credit revenue. Each transaction is then recorded into a journal organized by month.

At the end of each month, the totals are added up from the journal and are placed into what are called “T-Accounts”. These are T-shaped charts with the debits on the left side and credits on the right. It is used to more easily find the ending balance of each account at the end of the month. After the totals of each account are found, you can now make an income statement to determine your amount of money lost or made during the month. The amount of income can be found by subtracting the expenses from your revenues. This is one of the most important financial statements that accountants have to deal with. Your income statement helps you determine if you are making profits or if you are losing money and need to improve a sector of your business.

Once you have transferred all of your journal entries into T-accounts and have made an income statement, you are then prepared to make a balance sheet. This is the basic accounting equation in which you make sure that Assets = Liabilities + Owner’s Equity. When you sum all of your asset accounts they should be equal to all of the liability and equity accounts as well. This is why anyone in any type of business should always have a basic understanding of the accounting process. With the knowledge of how money flows throughout a business, you can make wiser, more experienced decisions with your business, and protect yourself from losing money. It also allows you to take risks with your business and potentially gain a big return when it comes to the bottom line of your income statement. I’m pleased to say that I can now understand a company’s financial statements and comprehend the transactions that go on in every day business. Any business student will be more successful in their future career if they learn the crucial basics of accounting.



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Basic Tips on Personal Finance

Planning your personal finances doesn’t always come naturally, and even if you’re just beginning to take your financial matters seriously, then you likely need a few personal finance tips.

Evaluate your current financial situation. One of the most important goals for most people is financial independence. Collect accurate information about your personal financial situation. Calculate your net worth which includes the real estate, saving and retirement accounts, and all other assets. This will help you decide how much money you can set aside for meeting future needs and goals.

A basic personal finance tip is to make a budget. A personal finance budget is information made up of your income and expenses and the more accurate this information is, the more likely you are be able to meet your goals and realize your dreams. A personal finance budget should be made for at most one year at a time and include a list of your monthly expenses.

All expenses must be included. To be sure of that go through all your paid bills, check register and credit card receipts to find expenditures that recur every month and expenditures that happen less frequently. Personal finance budgeting requires some small sacrifices. To be able to make good personal financial decisions and set priorities, you must know where your money is actually going. Start your budget and accomplish your goals.

Get an electronic bill pay. This is a very convenient way to pay your bills. You pay them electronically, by direct withdrawal from your bank account. The transaction is processed immediately. You can even link your bill pay service to your personal finance budget, so that your expenditures are automatically entered in the appropriate category. Personal financial management can be really easy.

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Personal Finance Budgeting Basic and Budgeting Elements

 

Having sound Personal Finance Budgeting has many benefits. Budgeting properly will help you plan for and reach your financial goals and dreams as well as eliminate financial stress.

 

Financial budgeting is a necessary administrative task that if done well can help keep away debt anxiety, overwhelm as let you know exactly where you are so you know what you need to do to make your balance sheet look more positive.

 

If you don’t like budgeting you can always use personal finance software that enables you to make budgeting quick, fun and easy.

 

Figuring out how to budget your personal finances successfully is an essential and important tool to removing financial stress then.

 

Budgeting to tips to help you reach your goals.

 

1.            Round up every financial statement you have. This includes bank statements, investment accounts, recent utility bills and any information regarding a source of income or expense and record all of your areas of money coming in.

 

2.            Write down a list of all the expected expenses you plan on incurring over the course of a month. This includes a mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings and everything you spend money on.

 

3.            Break expenses into two categories:

 

•             Fixed expenses are those that stay relatively the same each month and are required parts of your way of living. They included expenses such as your mortgage or rent, car payments, cable and/or internet service, trash pickup, credit card payments and so on.

 

•             Variable expenses are the type that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts to name a few.

 

4.            Total your monthly income and monthly expenses. If your end result shows more income than expenses you are off to a good start. This means you can prioritize this excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate that debt faster. Also, make necessary adjustments to expenses.

 

5.            Review your budget monthly. It is important to review your budget on a regular basis to make sure you are staying on track. After the first month take a minute to sit down and compare the actual expenses versus what you had created in the budget. This will show you where you did well and where you may need to improve.

 

Of course if you use personal finance software you will find this task as simple as entering in the figure into a pre made spreadsheet with all the categories listed for you. This eliminates thinking on your behalf and will save you heaps of time.

 

Using software, especially for someone who doesn’t have much knowledge about intricacies of accounting and finance, will be beneficial for you in the following ways:

 

• Speed: All you have to do is to enter the data about your income and expenditure and it will sort out your expenses and create plans for your future personal finance. Good software will even calculate your taxes.

 

• Bill payments: Some programs are integrated with the internet and your bank so that it will pay your bills automatically. This is the best way to pay your bills on time and avoid late fees or discontinuation of services.

 

Remember a stable financial future starts with good personal finance budgeting. If you are like most people who hate the thought of being trapped within a budget get yourself a good financial software program that will make the exercise more enjoyable.

 

 

 

Discover more about personal finance budgeting here.

How do you make your life better? get more control? protect your family? Create a personal financial plan. Start here!

Personal Financing baby!


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Basic Tips on Personal Finance

Do you ever wonder where your money goes every month? Does it sometimes seem as though you cannot afford to do things because your financial obligations are holding you back? If you find that you are asking yourself these sorts of questions, perhaps you should take a look at your financial situation and assess whether you are practicing good personal finance management or not. Good personal finance management spends within their income, plan for the future and solve financial problems as they arise. Poor personal finance management pay more, do without and fall behind. If you find yourself in the second category, you can do something about it. You can learn to take charge of your finances by planning your personal finances.

Planning your personal finances doesn’t always come naturally, and even if you’re just beginning to take your financial matters seriously, then you likely need a few personal finance tips.

Evaluate your current financial situation. One of the most important goals for most people is financial independence. Collect accurate information about your personal financial situation. Calculate your net worth which includes the real estate, saving and retirement accounts, and all other assets. This will help you decide how much money you can set aside for meeting future needs and goals.

A basic personal finance tip is to make a budget. A personal finance budget is information made up of your income and expenses and the more accurate this information is, the more likely you are be able to meet your goals and realize your dreams. A personal finance budget should be made for at most one year at a time and include a list of your monthly expenses.

All expenses must be included. To be sure of that go through all your paid bills, check register and credit card receipts to find expenditures that recure every month and expenditures that happen less frequently. Personal finance budgeting requires some small sacrifices. To be able to make good personal financial decisions and set priorities, you must know where your money is actually going. Start your budget and accomplish your goals.

Get an electronic bill pay. This is a very convenient way to pay your bills. You pay them electronically, by direct withdrawal from your bank account. The transaction is processed immediately. You can even link your bill pay service to your personal finance budget, so that your expenditures are automatically entered in the appropriate category. Personal financial management can be really easy.

Make an investment and finance plan. Now that the fundamental state of your personal financial security has been established, the time has come for the more prosperous part of your personal financial life. You need to make a personal finance plan of what you really want in life that money can buy. Your personal financial plan can be as simple or as detailed as you want it to be. Find out how to finally start to implement this plan and get the money to finance it. This is the long term part of your financial. This journey is the most interesting and exciting part of personal financing you can have toward financial freedom.

You can prepare for a secure personal financial future by following these simple tips. When you take control with your money, you don’t have to worry about debt taking control of you.

This is a 10 minute preview of the show. To listen to the show in its entirety click here www.ricedelman.com SHOW SUMMARY: • Where do people turn for advice during a personal financial crisis? • What are derivatives? • Should you use the equity from your home to purchase insurance? •How often should you rebalance? •Should your child go to college? •IRA mistake #13: Choosing investments that are too conservative? • Are 529 college savings plans a good way to save for college? • Short terms vs. long term bonds; where you should be? •Principles of Dollar Cost Averaging? •Choosing a lump sum payout vs. annuity income when retiring from a company? •How to save for your child/grandchilds retirement with the Ric-E Trust? • To buy or not to buy Long Term Care Insurance? • Should a caller convert to a Roth IRA? • Comparing fees when refinancing? • Should you spend your savings to pay your mortgage?
Video Rating: 5 / 5

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Basic Tips On Personal Finance

Do you ever wonder where your money goes every month? Does it sometimes seem as though you cannot afford to do things because your financial obligations are holding you back? If you find that you are asking yourself these sorts of questions, perhaps you should take a look at your financial situation and assess whether you are practicing good personal finance management or not. Good personal finance management spends within their income, plan for the future and solve financial problems as they arise. Poor personal finance management pay more, do without and fall behind. If you find yourself in the second category, you can do something about it. You can learn to take charge of your finances by planning your personal finances.

Planning your personal finances doesn’t always come naturally, and even if you’re just beginning to take your financial matters seriously, then you likely need a few personal finance tips.

Evaluate your current financial situation. One of the most important goals for most people is financial independence. Collect accurate information about your personal financial situation. Calculate your net worth which includes the real estate, saving and retirement accounts, and all other assets. This will help you decide how much money you can set aside for meeting future needs and goals.

A basic personal finance tip is to make a budget. A personal finance budget is information made up of your income and expenses and the more accurate this information is, the more likely you are be able to meet your goals and realize your dreams. A personal finance budget should be made for at most one year at a time and include a list of your monthly expenses.

All expenses must be included. To be sure of that go through all your paid bills, check register and credit card receipts to find expenditures that recur every month and expenditures that happen less frequently. Personal finance budgeting requires some small sacrifices. To be able to make good personal financial decisions and set priorities, you must know where your money is actually going. Start your budget and accomplish your goals.

Get an electronic bill pay. This is a very convenient way to pay your bills. You pay them electronically, by direct withdrawal from your bank account. The transaction is processed immediately. You can even link your bill pay service to your personal finance budget, so that your expenditures are automatically entered in the appropriate category. Personal financial management can be really easy.

Make an investment and finance plan. Now that the fundamental state of your personal financial security has been established, the time has come for the more prosperous part of your personal financial life. You need to make a personal finance plan of what you really want in life that money can buy. Your personal financial plan can be as simple or as detailed as you want it to be. Find out how to finally start to implement this plan and get the money to finance it. This is the long term part of your financial. This journey is the most interesting and exciting part of personal financing you can have toward financial freedom.

You can prepare for a secure personal financial future by following these simple tips. When you take control with your money, you don’t have to worry about debt taking control of you.

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Ways to become a millionaire include setting aside money for savings, and building up a financial emergency fund. Strive to be a millionaire by changing an overall attitude about money with tips from a futures and options floor trader in this free video on personal finance. Expert: Mark Griffith Bio: Mark Griffith has graduated in economics and philosophy at Clare College, Cambridge. He has been a futures and options floor trader at LIFFE (London International Financial Futures Exchange). Filmmaker: Paul Volniansky