Accounting Basics Every New Business Owner Should Learn

​By: Emily Heaslip, Contributor

When you first start as a business owner, you will have to wear many hats. You may find yourself launching a marketing campaign, ringing up purchases, designing your online store, and managing accounting all in the same day.
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However, the learning curve can be steep if you’ve never done business accounting before. You may not even know what you don’t know.

Everyone starts somewhere, and while you may eventually hire an accountant, it can be helpful to know the basics so you can build a good partnership. Here are some accounting basics to help you familiarize yourself with this important business function.

Master the key documents
Five documents show you how your business is performing financially. When you can read and prepare these documents, you’ll be able to make better decisions and improve your business’s financial health. The documents you should know include:

• Income statement: This shows your company’s profitability — how much money your business has earned or lost.
• Balance sheet: This is a high-level view of your business's financial health at a single point in time.
• Profit and loss (P&L) statement: This provides a snapshot of your business’s income and expenses quarterly, monthly, or yearly.
• Cash flow statement: This shows how and where you receive and spend money through your business operations, investing, or financing.
• Bank reconciliation: This reconciles your bookkeeping with your bank balance, helping you keep consistent records for tax purposes.

By understanding these documents, you can begin to see how your company is growing sustainably.

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