![]() ![]() ![]() This practice made it very difficult to compare the financial reports of two given companies. Without any universal standards for financial reporting, companies were free to manipulate their metrics any way they could to show their themselves in financially positive way. These practices have evolved with the increasing complexity of businesses in a global market, but they lacked any uniform standard until the early 20th century. So what does any of this mean for your business? Let’s take a brief look at the history of accounting to give a little more context.Īccounting practices for businesses date back hundreds of years, with the first recording of double-entry bookkeeping in the 13th century by a Florentine merchant named Amatino Manucci. It’s a set of accounting rules and standards that allow for uniform preparing of financial reporting – required by law for publicly traded companies. GAAP is an acronym for generally accepted accounting principles. Accrual accounting requires that you record payments and expenses when they are incurred, rather than when they are paid. Should you choose cash or accrual accounting? And what is this GAAP accounting you keep hearing about – is it a necessity or just a nice-to-have? These are important decisions, as they can affect your business’s ability to grow in the short- and long-term.Ĭash accounting dictates that you record payments when they are received and expenses when they are paid. One thing that may not have crossed your mind? The accounting side of your business.Īs with anything in life these days, there are a number of choices. You probably ventured out on your own because you have a specialty, passion, or specific product idea. Starting and managing your own business is an exciting prospect.
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