Chapter 23
Accounting Ease
There's no business like show business, but there are several businesses like accounting.
—David Letterman
Business accounting is a way to keep score. If one purpose of a business is to make a profit (certainly there are many others—to create value, find meaningful work, live your dream, make the world better, and so on), then proper business accounting helps you know how well you are doing. No, it is not glamorous, but it is important. Remember, there are two parts to your business: doing the things you love and doing the things you must. Accounting falls into the latter category (unless, of course, you are an accountant).
Accounting Basics
Accounting is the general process of tracking your income and expenses and then using those data to examine the financial status of your business. Your basic accounting tool is the general ledger. It is the place where you keep track of all of your business's financial transactions. That information is then used to create financial statements such as balance sheets and income statements. An accounting period is a set amount of time during which a business's financial reports can be compared with one another; it may be a month, a quarter, or a year. One year in a company's financial life is called a fiscal year.
The general ledger comprises four basic categories: assets, liabilities, income, and expenses. All general ledger entries are double entries—debits are kept on the left and credits on the right—and for every ...
