Business is exciting and interesting. That is until as a sole proprietor one has to take time away from the excitement to do their Amazon bookkeeping. It is dull and time-consuming. It is difficult and complicated. It can be overwhelming if one has had many transactions during the period. There is software of course but then what good is software if one does not know which number to put where?
Just like regular businesses, e-commerce traders still have to pay taxes. Taxes have to be filed on time. The authorities announce the dates months in advance. That is why there is a penalty for late filing. It is assumed to be due to either ignorance or laziness. Taxes also have to be filed properly. If one is doing all of the things on their own with nary a knowledge of accounting principle then it is guaranteed that they will make a mistake. Often, a fatal one.
Another great reason is that doing the books regularly allows one to have a consistent view of the growth. One can keep an eye on the curve. They can then decide if the rate of growth is favorable or if it needs a little burst of energy. It also allows one to pull resources from unprofitable endeavors.
The first important document to know about is the profit and loss statement. This could possibly be the most important document in this whole exercise. This document will provide information about the bottom line of the business. It will provide a performance report for the business. Is there a profit or loss? How does it compare to previous months? How about a look at each aspect on its own? What kind of movement is being experienced in the revenue section? How about the expenses section? How do the movements compare?
That is not the only document required though. One should also create a statement of financial position. This is also called a balance sheet. It follows a format that satisfies the accounting equation. The assets should equal the liabilities plus equity. This document will include things like accounts receivable and accounts payable. It also accounts for unsold inventory. This will provide a status on the overall health of the business.
There is a smaller document one can keep. This is not official and the format is not prescribed. A journal is a record of every single transaction and action in the business. This is kept daily or any time there is movement. It ensures that the data is all in one place and can be easily retrieved when doing the books. One can also use this journal to ensure everything is accounted for. Record keeping is key.
It is tempting to wait until a few days before the tax deadline to get this done. However, that is probably the worst thing one can do. Here is no telling what is lurking behind the numerical curtain. The exercise could prove more time consuming than expected. Then one would either have to rush through or they would leave it unfinished.
Imagine a few years down the line the business is audited? Or imagine there are greener pastures to move on to which warrants selling of the business? How will new managers get the backstory? This way, former mistakes are avoided in the future. Therefore ensure these accounting records have been properly and safely stored. Safety is a big issue as in the wrong hands there is no telling what the documents can be used for.
Just like regular businesses, e-commerce traders still have to pay taxes. Taxes have to be filed on time. The authorities announce the dates months in advance. That is why there is a penalty for late filing. It is assumed to be due to either ignorance or laziness. Taxes also have to be filed properly. If one is doing all of the things on their own with nary a knowledge of accounting principle then it is guaranteed that they will make a mistake. Often, a fatal one.
Another great reason is that doing the books regularly allows one to have a consistent view of the growth. One can keep an eye on the curve. They can then decide if the rate of growth is favorable or if it needs a little burst of energy. It also allows one to pull resources from unprofitable endeavors.
The first important document to know about is the profit and loss statement. This could possibly be the most important document in this whole exercise. This document will provide information about the bottom line of the business. It will provide a performance report for the business. Is there a profit or loss? How does it compare to previous months? How about a look at each aspect on its own? What kind of movement is being experienced in the revenue section? How about the expenses section? How do the movements compare?
That is not the only document required though. One should also create a statement of financial position. This is also called a balance sheet. It follows a format that satisfies the accounting equation. The assets should equal the liabilities plus equity. This document will include things like accounts receivable and accounts payable. It also accounts for unsold inventory. This will provide a status on the overall health of the business.
There is a smaller document one can keep. This is not official and the format is not prescribed. A journal is a record of every single transaction and action in the business. This is kept daily or any time there is movement. It ensures that the data is all in one place and can be easily retrieved when doing the books. One can also use this journal to ensure everything is accounted for. Record keeping is key.
It is tempting to wait until a few days before the tax deadline to get this done. However, that is probably the worst thing one can do. Here is no telling what is lurking behind the numerical curtain. The exercise could prove more time consuming than expected. Then one would either have to rush through or they would leave it unfinished.
Imagine a few years down the line the business is audited? Or imagine there are greener pastures to move on to which warrants selling of the business? How will new managers get the backstory? This way, former mistakes are avoided in the future. Therefore ensure these accounting records have been properly and safely stored. Safety is a big issue as in the wrong hands there is no telling what the documents can be used for.
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