Small Business Accounting Pittsburgh, PA

Small Business Accounting

In today’s business world, more and more people are setting up their own businesses, and an understanding of basic accounting principles is mandatory. Even if you hire an independent accountant, most small business owners will make initial financial entries. A ledger containing a record of debits and credits is a necessary starting place. (There is excellent software available).

A small business must inventory and keep track of its assets.  For example, the company’s bank account, a company car, machinery, real estate, any loans you have made are considered tangible assets.  Intangible assets would include patents and the company’s good will.

Obligations owed by your company are called liabilities. A bank loan, accounts payable, mortgages--- all are liabilities. Short term liabilities are those due to be paid in a twelve month period. Long term liabilities are those longer than one year. The difference between assets and liabilities is called owner’s equity. If assets are greater than liabilities the equity is positive.

The small business accountant is responsible for keeping track of the following: salaries and wages, utility costs, repairs, maintenance, depreciation, amortization, interest and rent, if applicable. It is also necessary to set up and administer payroll, the health insurance benefit program, and pension or 401K program.  The accountant also takes care of salary or wage deductions for Federal, state and local income tax, and Social Security tax.  The accountant also prepares the company’s tax returns. A small business owner may find that hiring an outside accountant is a prudent investment, especially initially.  It is also a good idea to discuss your business plan with an accountant before you establish your company.