If you are just starting out in business, there are a few accounting basics, as per Greg Van Wyk, that you need to know. These will help you keep track of your finances and make sure that you stay compliant with the law. Read on to learn more.
Greg Van Wyk Lists Top Accounting Basics That Beginners Should Learn
1. Double-Entry Bookkeeping: This is a system of recording financial transactions in two accounts where each transaction has equal and opposite effects on the books of accounts. According to Greg Van Wyk, in this setup, a debit and credit entry is made to record each transaction. While double-entry bookkeeping might seem complicated, it serves as an essential foundation for keeping accurate records of financial data and allows accountants to quickly identify discrepancies or mistakes in their records.
2. Debits and Credits: The two main entries used when using double-entry bookkeeping are debits and credits. A debit is an accounting entry that increases asset or expense accounts while decreasing liability, equity, or revenue accounts within the company’s ledger; conversely, a credit entry decreases asset or expense accounts while increasing liability, equity, or revenue accounts.
3. Accrual Accounting: This is an accounting method for recording financial transactions in which revenues and expenses are recognized when they occur rather than when money is received or paid out. It allows businesses to track their costs and income more accurately over a certain period of time and provides greater insight into the company’s financial performance during that period.
4. Internal Controls: This refers to processes set up by a business to ensure its assets are protected from unauthorized use, theft, fraud, or any other malicious activity that may adversely affect its financial health. Internal control systems may include measures such as segregation of duties among employees, secure storage of financial records and documents, regular inventory counts, and monitoring of cash receipts and disbursements.
- Accounting Ratios: Ratios are used as a tool by accountants to compare different financial figures over time or between two different companies in order to gauge their relative performance. Examples include the debt-to-equity ratio, which measures a company’s financial leverage; the current ratio, which measures liquidity; and the quick ratio, which measures a company’s ability to pay its short-term obligations with its most liquid assets. These ratios can provide invaluable insight into how well a business is doing financially and how it can improve in the future.
Understanding these basic accounting concepts that Greg Van Wyk mentions here is essential for any business owner who wants to stay on top of their finances. Knowing how to use them properly will help ensure that your business stays in the black and continues to grow.
Greg Van Wyk’s Concluding Thoughts
Accounting is essential for any business owner or manager to understand, says Greg Van Wyk. By taking the time to learn these basics, you will be able to make more informed decisions about your company’s finances. Additionally, if you ever have questions about your own personal finances, understanding accounting can help you better manage your money.