Accounting Guides for Small Businesses

Billed publishes these accounting articles. They're grouped by what you're trying to do, with a line on what each one covers.

The articles explain how things are recorded and reported. For how a rule applies to your own business, ask your accountant.

Accounting Invoicing Marketing Statistics Taxes Startup Leadership Productivity Estimating Expense Management Online Payments Freelancing Product News

Bookkeeping basics

Recording transactions, from the first entry to a balanced set of books.

What is bookkeeping?
Why keep books, what bookkeeping records, single-entry and double-entry methods, a sample month and how long to keep records.
Double-entry bookkeeping
Debits, credits and the accounting equation, normal balances and T-accounts, with a sample equipment purchase.
Debits and credits
Which side increases each type of account, contra and abnormal balances, and two sample entries.
Journal entries
What goes into a journal entry, which side increases each account, a worked example and mistakes to check for.
The general ledger
Where the ledger fits, control accounts and subsidiary ledgers, and a sample month of receivables.
Chart of accounts
The five types of account, how accounts are numbered and setting up a chart for a small studio.
Trial balance
The three types of trial balance, how to prepare one, what to do if the totals don't match and what a balanced one doesn't prove.
The accounting cycle
The steps from transaction to financial statements, and what closing does at the end of a period.
Accrual accounting
Accrual and cash basis compared, accruals and deferrals, US tax rules for accounting methods and mistakes to avoid.
Revenue recognition
The revenue recognition principle, the five-step model and how a prepaid maintenance contract is recorded.
Types of accounting
Financial, managerial and cost, tax, auditing, and governmental and not-for-profit accounting, with one month seen two ways.
Fiscal year
Fiscal and calendar years, a seasonal business example, and US tax rules for short tax years and changing your tax year.
Catching accounting mistakes
Source documents, prompt recording, balanced entries, bank reconciliation and trial balance checks for finding errors.

Financial statements and year-end

What each statement shows, how they connect and how to close the year.

Small business financial statements
The four statements as a set, how net income, equity and cash connect them, and a sample month that ties out.
Balance sheet and income statement
Which accounts go on each statement, how closing moves profit into equity, and a sample year sorted into both.
Balance sheet
The accounting equation, what's on a balance sheet, how it connects to the other statements and US Schedule L.
Profit and loss statement
What the P&L shows, multi-step and single-step formats, and why profit isn't the same as cash.
Cash flow statement
The three sections of the statement and how to prepare it with the indirect method, using a design studio's quarter.
Making an accounting report
Choosing the reader and the period, bringing the books up to date, building the statements in order and checking them.
Financial reports
Two kinds of report, starting from the question you need answered, and comparing the same report across periods.
Closing the accounting year
Recording the year's transactions, reconciling, adjusting entries, the adjusted trial balance, closing entries and the post-closing trial balance.
Consolidated vs. separate statements
What each set covers, what the SEC and US GAAP say about control, and two balance sheets combined into one.
Multi-entity accounting
When more than one set of books is needed, how to set them up, and why taxes are separate from consolidation.
Accounting audits
External audits, internal controls and how IRS audits differ, with US record-keeping dates.
Retained earnings
How retained earnings are calculated and where they appear in the financial statements.

Assets, liabilities and equity

What a business owns and owes, and how each item is recorded.

Fixed vs. current assets
The definitions side by side, why the same item can land on either side, and a sample shop's assets sorted.
Tangible fixed assets
What counts as one, what goes into its cost, repairs versus improvements, depreciation, book value and an asset register.
Calculating depreciation
Straight-line, units-of-production and double-declining-balance methods, compared on one van.
Amortization
Loan amortization, amortization of intangible assets, how it differs from depreciation and US section 197 rules.
Goodwill
When goodwill is recorded, how to calculate it, impairment after the purchase and US federal income tax treatment.
Capital expenditure
How capital spending is recorded and shown in the financial statements, a machine purchase and US tax treatment.
Liabilities
The definition, current and long-term liabilities, examples and a sample liabilities section.
Accrued expenses
Examples, how they differ from accounts payable, how to record one and a month-end checklist.
Deferred revenue
Why it's a liability, how it differs from accounts receivable, and recording a prepaid service contract.
Accounting provisions
What IFRS calls a provision, how US GAAP treats contingent liabilities, and a warranty liability example.
Equity in business
Equity in the accounting equation, what it's called in each type of business, what changes it and the equity roll-forward.
Dividends per share
What dividends per share measures, why it can fall, and a stock split example.

Receivables, payables and reconciliation

Money customers owe you, money you owe, and checking the books against the bank.

Accounts receivable
The definition, why it's an asset, how a credit sale is recorded and what happens when a receivable isn't paid.
Accounts receivable aging report
How the report is laid out and read, and how the aging method estimates uncollectible accounts.
Accounts receivable turnover
The formula, converting turnover to days, how to read the result and what can distort it.
Bad debt
How a receivable becomes a bad debt, the two ways to record it, US tax treatment and prevention steps.
Accounts payable
What counts as accounts payable, how it's recorded, how it differs from a loan and controls for a small business.
Accounts payable aging report
Listing unpaid bills, grouping them by age, totaling by supplier and tying the report to your books.
Account reconciliation
What gets reconciled, how to reconcile an account, causes of differences and when to reconcile.
Bank reconciliation
Why the book and bank balances differ, how to reconcile them, a sample reconciliation and records to keep.
Streamlining the invoicing process
The invoicing steps and handoffs, what to set up once, a routine to run it on and keeping invoice records.

Expenses

Recording business costs and the reports employees submit.

Expense accounts
What an expense account is, how entries reach it, accounts businesses use and creating your own.
Expense reports
What happens to a report from submission to the books, what goes on it and how an approved report is recorded.
Types of expense reports
The main kinds of expense report, what each line should show and how to prepare one, with a travel advance.

Cash flow

Where cash comes from, where it goes and keeping enough on hand.

Cash flow
Cash inflows and outflows, the three types of cash flow and two ways to show operating cash flow.
Managing cash flow
A week-by-week forecast, bringing cash in sooner, timing payments out, a cash reserve and a weekly review.
Cash flow gaps
What a cash flow gap is, the three parts of the cash cycle and what makes the gap longer or shorter.
Free cash flow
The formula, where its two numbers come from and what the SEC says about the term.
Working capital
The formula and the ratio, how to read the result and what changes working capital.
Liquidity and the quick ratio
How liquid each asset is, the three liquidity ratios and how receivables affect liquidity.

Costs and pricing

What your products and services cost, and what each sale contributes.

Cost accounting
How it differs from financial accounting, job and process costing, assigning overhead and costing one job.
Cost of goods sold
The formula, a small retailer's year, how the IRS lays it out and what cost of goods sold leaves out.
Cost of revenue
How cost of revenue, cost of goods sold and operating expenses differ, including for service businesses.
Production costs
Materials, labor and overhead, how overhead reaches a product and which costs aren't production costs.
Direct labor cost
What counts as direct labor, tracking hours by job and direct labor in prime cost.
Indirect labor cost
What counts as indirect labor, how to calculate it for a period and where the cost goes.
Manufacturing overhead
Listing overhead costs, choosing an activity base, setting a predetermined rate and comparing applied and actual overhead.
Overhead cost
Overhead and direct costs, and how to calculate an overhead rate and apply it to a job.
Fixed and variable costs
How each cost behaves, mixed and step costs, and splitting a mixed cost with the high-low method.
Marginal cost
The formulas, pricing an extra order and how marginal cost differs from average cost.
Activity-based costing
The five steps, two clients costed two ways and when activity-based costing helps.
Contribution margin
The formulas, a service package example, and how contribution margin differs from gross profit.
Break-even point
The two formulas, adding a profit target, margin of safety and a yoga studio's monthly break-even.
Inventory systems
Perpetual and periodic systems, their benefits and drawbacks, and the cost methods used with each.
Inventory turnover ratio
The formulas, a shop's year, how to read the result and ways to improve turnover.

Profit and performance

Measuring profit and reading the ratios built from your statements.

Gross profit
The formulas, what counts as cost of goods sold and how gross profit relates to other profit measures.
Profit margin
Gross, operating and net margins from one year's figures, and how profit margin differs from contribution margin.
Operating income
The formula and which items are operating or non-operating, sorted on one year's income statement.
Operating margin
The formula, where operating income comes from, and what drives the margin.
EBIT
How to calculate earnings before interest and taxes, and how EBIT relates to EBITDA and gross profit.
Net income
How net income is calculated, a design studio's year and why net income isn't the same as cash.
Net sales
The net sales formula, the three deductions and where net sales appear.
Return on sales
The names for the same ratio, how to read it and how it fits inside return on equity.
Return on investment
The ROI formula, annual return, applying ROI to a business purchase and what it leaves out.
Financial ratio analysis
Liquidity, solvency, efficiency and profitability ratios, and how to compare them.
Debt ratio
What the ratio shows, the formula and how to read the result.
Debt-to-equity ratio
The formula, how to read it, how it relates to the debt ratio and what changes it.
Credit ratio analysis
Who uses credit analysis, the three groups of ratios and reading them together.
Sales indicators
Metrics and KPIs, five sales indicators and choosing the period to measure.

Budgets and decisions

Planning spending and comparing options before you commit.

Business budgets
What a budget is for, how to create one, and checking a sales budget against actual results.
Zero-based budgeting
How it differs from traditional budgeting, its advantages and drawbacks, and a zero-based process.
Variance analysis
Favorable and unfavorable variances, static and flexible budgets, the four cost variances and explaining them.
Opportunity cost
Money, time and resources, opportunity cost and sunk cost, and choosing between two jobs.
Sunk cost
Why sunk costs are hard to ignore, how to keep them out of a decision and how they differ from fixed costs.

AI accounting software

What vendors say their AI tools do, and what still needs a person.

AI bookkeeping software
What AI does in bookkeeping, where people still make the call and questions to ask before you choose.
AI tax software
What AI does in tax work, what the IRS says about responsibility, and where a person still has to decide.