By L Dawson
The Profit & Loss Statement describes you how your business is performing at that particular time and the Balance Sheet is the statement that tells you about the long-term health and strength of your business. The Balance Sheet shows whether you can meet your obligation as they come due, how much you are indebted to others and your prospects for staying in business.
Assets = Liabilities + Equity. This is the accounting equation. Assets = your stuff. Liabilities and equity = how you paid for your stuff. Liabilities indicate how much of your stuff that you have paid for with other people's money. Equity shows how much of your stuff that you have paid for with your own money. Retained earnings are exactly what they sound like: how much of previous years' profits you have retained in the business.
The terms current assets and current liabilities have a special meaning in the Balance Sheet. Current, in this case, indicates any asset or liability that will convert into cash within the next 12 months. Accounts receivable is current because when your customers pay you (hopefully within 12 months), that asset will become cash. Same with inventory: When you sell your product, that asset converts to accounts receivable and then to cash, typically within 12 months. On the liability side, accounts payable are typically paid within 12 months. So are credit card bills and your bank credit line.
Another interesting feature of the Balance Sheet is that the assets and liabilities are listed according to their liquidity. So cash is the first asset, accounts receivable the second, inventory the third and so on. Fixed assets and investments are listed toward the bottom of the asset side of the balance sheet because they are not expected to convert to cash anytime soon. The same holds true for liabilities: accounts payable first, credit cards next with long-term debt coming in lower on the liabilities side of the Balance Sheet.
Financial ratios are very helpful in assessing the strength of your business. The current ratio (current assets minus current liabilities) indicates how much free cash that you have. A current ratio greater than one indicates that you have sufficient current assets to meet your current obligations as they come due.
The debt to equity ratio (total liabilities divided by total equity) indicates how much of your creditors' money as compared to how much of your money is supporting your assets. A debt-to-equity ratio greater than one is a strong indicator that you have borrowed too much. Too much debt is not a problem during good times, but it can wreak havoc when your business dips.
So take a few minutes and look at your Balance Sheet. Compare it with last year and see how your business is progressing. Compare your current ratio and debt-to-equity ratio to last year and see if your business is becoming strong or weaker. You will be surprised at how much valuable information is contained in your Balance Sheet.
Linda Dawson is a Certified Public Accountant with more than 25 years experience helping small and start-up businesses. Dawson & Associates has just introduced their latest service, the Virtual Accounting Office. Learn more about this exciting new product at www.myvao.com Or check out the Dawson & Associates website at www.dawsoncpa.com
Article Source: http://EzineArticles.com/?expert=L_Dawson
http://EzineArticles.com/?Beyond-Taxes---How-Your-Balance-Sheet-Statement-Can-Help-You-Run-Your-Business&id=1530979
Tuesday, September 30, 2008
Wednesday, September 24, 2008
How to Find the Right Accounting Software For Your Business?
By George Henry
Nowadays, business requirements demand accurate and fast accounting. Many businesses do not have the budget to hire accounting professionals to handle their account. Therefore, accounting software will be handy here. In the market, there are different accounting software available. So how can you find the right software for your business?
As your business grows, there will be a larger amount of accounting transactions that need to be handled. You will not have the time to do it yourself and so you will need to hire an accounting professional to help you do the job. With the accounting professional in your company, you will also need to purchase business accounting software so that he or she can work faster and more efficiently.
Good accounting software can help you to keep track of cash transactions, account receivables, financial returns, payments received and your business balance sheet. All these numbers are very important to your business and you should have an accurate record of them.
So what makes accounting software so popular and in demand? Due to the advanced technology, more businesses are now relying on software and computer technology to maximize profits and make viable business predictions. As a business owner, you should not overlook this too.
When it comes to choosing the right accounting software for your company, do take note that there are customized accounting software designed for particular industries. The accounting software for retail is completely different from any other industry accounting software. Therefore, before you purchase any software, make sure that you have the specific business needs ready.
Interestingly, there is also accounting software designed for churches. Although churches are non-profit organizations, there are still money transactions going on. So, they will still need accounting software to help them manage their account more accurately.
So when you are looking for accounting software for your business, you need to find software that is designed for your industry. If there is one in the marketing, you can end your search.
It is very rare for you not to find one that is catered for your industry as almost all areas of business activities have already been covered by accounting software programmers. So take your time to research and find the best one for your business. In the case that you cannot find one, look for the next best option available. Look for one in the industry that is similar to what you are currently in. This should be able to satisfy your business needs.
For more information on MYOB Software and other Accounting Software, visit the link below:
Click Here --> http://www.361dc.com
Feel free to publish this article on your website, or send it to your friends, as long as you keep the resource box and the content of the article intact.
Article Source: http://EzineArticles.com/?expert=George_Henry
http://EzineArticles.com/?How-to-Find-the-Right-Accounting-Software-For-Your-Business?&id=1497224
Nowadays, business requirements demand accurate and fast accounting. Many businesses do not have the budget to hire accounting professionals to handle their account. Therefore, accounting software will be handy here. In the market, there are different accounting software available. So how can you find the right software for your business?
As your business grows, there will be a larger amount of accounting transactions that need to be handled. You will not have the time to do it yourself and so you will need to hire an accounting professional to help you do the job. With the accounting professional in your company, you will also need to purchase business accounting software so that he or she can work faster and more efficiently.
Good accounting software can help you to keep track of cash transactions, account receivables, financial returns, payments received and your business balance sheet. All these numbers are very important to your business and you should have an accurate record of them.
So what makes accounting software so popular and in demand? Due to the advanced technology, more businesses are now relying on software and computer technology to maximize profits and make viable business predictions. As a business owner, you should not overlook this too.
When it comes to choosing the right accounting software for your company, do take note that there are customized accounting software designed for particular industries. The accounting software for retail is completely different from any other industry accounting software. Therefore, before you purchase any software, make sure that you have the specific business needs ready.
Interestingly, there is also accounting software designed for churches. Although churches are non-profit organizations, there are still money transactions going on. So, they will still need accounting software to help them manage their account more accurately.
So when you are looking for accounting software for your business, you need to find software that is designed for your industry. If there is one in the marketing, you can end your search.
It is very rare for you not to find one that is catered for your industry as almost all areas of business activities have already been covered by accounting software programmers. So take your time to research and find the best one for your business. In the case that you cannot find one, look for the next best option available. Look for one in the industry that is similar to what you are currently in. This should be able to satisfy your business needs.
For more information on MYOB Software and other Accounting Software, visit the link below:
Click Here --> http://www.361dc.com
Feel free to publish this article on your website, or send it to your friends, as long as you keep the resource box and the content of the article intact.
Article Source: http://EzineArticles.com/?expert=George_Henry
http://EzineArticles.com/?How-to-Find-the-Right-Accounting-Software-For-Your-Business?&id=1497224
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