Businesses
or individuals adapting to financial record keeping need to follow
some of the basic rules or principles of accounting as in any other
activity. It better not to go ahead with accounting without following
the basics or the Generally Accepted Accounting Principles(GAAP),
that may rather end in messing up with finances. Apart from this by
adhering to proper accounting guide lines makes both the internal and
external customers confident about an organization.
Most accounts of businesses are based on two methods of accounting
the cash basis and accrual basis. In cash basis accounting the
transactions are recorded based only on the transfer of cash, like
when the cash is received it is recorded instantly, expenses are
recorded only when the real payment happens. In the accrual method
whether the cash is paid or not the transaction is recorded and the
credit owed to the company and credit owed by the company is
recorded.
Almost most of the small business people follow the cash method as
the number of transaction will be less as the information of payments
can be noted down easily. But in case of large corporations accrual
method is most preferred. Small business owners can manipulate their
revenues from the eyes of tax authorities by recording the cash
received to the next financial year to evade tax. But large
corporations cannot do this because of large amount of cash
transactions and the other factor is the fear of loosing their
reputation with stakeholders if tracked by the government agencies.
Whatever accounting principle is followed it is mandatory nowadays to
have an accounting information system in place. Small business people
will find difficulty in investing for this kind of a setup. To get
more functionality and accuracy as expected with information system,
but always with a higher price tag.
Numia.biz a simple online service that is aimed at small business
accounting with the flexibility of using both the cash and accrual
basis of accounting. Even though it is aimed at small business
accounting it can be used by even larger companies due to fact that
it supports accrual basis accounting.