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Summary So, now let's recap some of the things that you've learned in this lesson and wrap up with a few more helpful tips: Most small businesses will want to use the accrual method of accounting. Even if you aren't required to do so for tax purposes, you'll have a better idea of where you stand month to month if you record your expenses as they are incurred. - Use a chart of accounts to keep organized and to help you understand the different types of accounts and their relationships.
- The main types of accounts include: Assets, Liabilities, Equity, Income and Direct and Indirect Expenses. (Equity Accounts go with the Liability Accounts on the balance sheet.)
- When you set up your chart of accounts and begin to assign account numbers, use some odd numbers. If you make all your numbers end in zero, it is easier to make a data entry error. For example, for an account you use a lot, like supplies, choose a main number like 5550...but make advertising 5312, not 5310. Spread yourself out over the available numbers...don't jam them up. You don't know when you'll need to add one at a future date, so leave some space. For indirect expenses, you get the whole world between 5000 and 5999. Spread 'em out.
- Most accounting software packages come with preset charts of accounts for various businesses, which you can use to get you started, and modify as needed.
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