In Business Since 2001 We accept Paypal
Home for Writers for Publishers Article Directory Article Search
Guides
Article Marketing Secrets
20-Min Article Writing
Author Resource Box
35 Traffic Strategies
Kindle Uploads 101
Fantastic Fiction Decoded


Click Here to
see on Amazon


Site Navigation
Home

Writing Services
+ FAQ

FAQ

+ About Us
+ Blogs
Search Tools
+ Search Our Articles
Article Directory
+ Authors
+ Articles
Other Sites We Own
Writing Puzzle

Professional Book Marketing

Platt Publishing

Marketing Help


 
Article Teaser: One startup decision that seems to cause entrepreneurs heartburn is whether to set up their accounting system on a cash basis or on an accrual basis. Although this sounds like secret accounting code, the implications are straightforward, and, for most businesses, the right method is easy to see.

Keep reading below...

Cash or Accrual Basis of Accounting? Which Should You Select When Starting a Business?

Copyright (c) 2010-2017

One startup decision that seems to cause entrepreneurs unnecessary consternation is selecting the right accounting method -- cash basis or accrual basis. The primary purpose of the accounting method you choose is to calculate your business's taxable income for federal (and state) income tax purposes. Of course, if you register as an LLC and elect not to be taxed as a corporation, your business does not pay federal taxes, but choosing the right accounting basis is still important. Financial management is a critical key to success in small business, and the accounting method you use is an important tool for keeping you on track.

What Are the Two Accounting Methods?

The difference between the two methods is simply a matter of timing -- when business transactions are posted to the accounting system. With the cash method, income and expenses are recorded when money changes hands. That is, no matter when you close a sale or place an order, it does not go on the books until you get paid or the bill is due. Cash basis accounting is basically managing your business finances like you do a checkbook -- money only exists once it is deposited, and expenses only exist once money is spent.

With the accrual method, the transactions are recorded when they occur, regardless of when you actually get paid or pay the bill. That's pretty much all there is to it -- when the transactions are posted on the books!

If You Sell Products, You Must Choose the Accrual Method

Deciding which accounting method is best for your business is not particularly difficult either. First, if you carry inventory that your business sells to customers, the IRS requires you to use the accrual method, for good reason. Because the accrual method accounts for all income and expenses when they occur (and not when money changes hands), your financial statements reflect a more accurate picture of how your business is doing. If you sell inventoried products of any kind, the expense of making or purchasing those products occurs in line with your ability to sell them (at least on the books). The accrual method keeps these income and expense accounts in line. Otherwise, if you buy inventory on credit but make cash sales, your books will look like you bring in a substantial income with no expenses during the grace period for payment. Then, when payments to your suppliers come due, the books will show enormous expenses all at once compared to income. By using the accrual method, a financial report for any given period will be a substantially more accurate reflection of the overall health of your venture.

If You Only Sell Services, You Have a Choice

For micro-businesses (consultants, self-employment, etc.) that sell only services, the cash method of accounting can be a good choice. Because income and expenses are recorded only when money is exchanged, the cash method gives a more accurate view of how much cash is available at any given time. Keeping the books for cash basis is like keeping a checkbook, money in and money out. The downside of using the cash method is that it can reflect a misleading picture of your business's overall profitability and health. For example, if you extend credit terms to your customers, your income at a given time will not necessarily reflect the actual sales volume during that time. Cash can still be moving in and out of the business during periods of no sales, as customers pay invoices and bills come due.

Plan for the Long Term Growth of Your Business

Think ahead when you are setting up your accounting system. Choose the cash method only if you plan to stay small and you only plan to sell services over the long term. Otherwise, use the accrual method and work on learning how to manage all aspects of your business's financial health. If your plans are to grow a company rather than own your job over the long term, the accrual method is a better tool to show the ebbs and flows of the business's transactions. Of course, you will still need to review and analyze cash flow to verify the health of your venture.

Your small business accounting software (Peachtree Accounting is a great choice!) allows you to select either cash or accrual basis for handling your books. However, once one is selected, you are stuck with it unless you start over with a new company file and migrate your data. The reason for this is that the federal government's rules are the same -- if you want to change your accounting basis, you have to file paperwork with the IRS.

Successful entrepreneurship means knowing how to read and analyze the entire financial picture, and neither accounting method ensures that on its own. Don't rely on a single financial report to tell you how your business is doing, but learn to use multiple financial management tools to keep an eye on the bottom line.


About The Author: Shop Amazon - Top Gift Ideas
K. MacKillop, a serial entrepreneur with a J.D. from Duke University, is founder of LaunchX and authors a blog focused on starting a business. The LaunchX System's comprehensive, step-by-step approach to starting a business will help you develop the knowledge and skills you need to make your business startup a success. Visit http://www.LaunchX.com/ and take our Business Readiness Assessment and learn what to do next for your business startup.

Follow "The Phantom Writers" on Twitter (@phantomwriters)
to be notified when new articles are made available.


VOTE ON THIS ARTICLE
Needs Work >> 0 - 1 - 2 - 3 - 4 - 5 << Excellent Article

Tell our authors what you think about their article.



Top-Level Category: Business Offline Articles || Related Categories: Business Online Articles and Finance Articles

10 Most Recent Articles Written by K. MacKillop

The Art of Working A Room -- Networking Skills for Small Business
Written by: K. MacKillop | Distributed: 2010-02-04 | Word Count: 1115 | Page Views: 1525 | Votes: 2 | Rating: 3.00
Mastering the art of effective networking marks the difference between merely successful entrepreneurs and captains of industry - the better you are at networking, the more power you wield. There are a few simple rules to follow to be successful working the room, and anyone with a little willingness can learn to be a master of networking.

Women and Social Entrepreneurship -- A Growing Trend
Written by: K. MacKillop | Distributed: 2010-02-02 | Word Count: 533 | Page Views: 1893 | Votes: 3 | Rating: 3.00
Many women are finding that the power and privilege that comes with successful entrepreneurship make it easier to make a difference, both financially and by promoting new ideas. Combining a for-profit business with social activism provides the best of both worlds. Women who are thinking about launching a nonprofit should consider the alternative -- Social Entrepreneurship.

Top Ten Startup Mistakes That Almost Always Lead to Business Failure
Written by: K. MacKillop | Distributed: 2010-01-28 | Word Count: 1188 | Page Views: 2463 | Votes: 3 | Rating: 3.33
Over two-thirds of new businesses fail within the first few years. Protect your business startup against these ten common startup mistakes and get on the road to a successful company.

Business Startups with Bad Credit
Written by: K. MacKillop | Distributed: 2010-01-26 | Word Count: 734 | Page Views: 2024 | Votes: 2 | Rating: 3.50
Bad personal credit is a common stumbling block for entrepreneurs. Working for your self is the best opportunity for building wealth. While bad personal credit can make the startup process slightly more challenging, it is not a total barrier to business ownership and business success.

Hiring Well When Starting a Business Can Be Critical to Success
Written by: K. MacKillop | Distributed: 2010-01-21 | Word Count: 912 | Page Views: 1405 | Votes: 2 | Rating: 2.50
Finding the right employees for your startup is critical. They will not only be representing your business, but they will also be representing YOU. Do your homework before you start hiring, and then hire the best people you can find.

Starting a Business? Should You Choose a Full-Time or Part-Time Startup
Written by: K. MacKillop | Distributed: 2010-01-19 | Word Count: 1150 | Page Views: 1375 | Votes: 1 | Rating: 2.00
Starting your own business is a huge endeavor that takes quite a bit of time and energy. Many potential entrepreneurs have a hard time deciding whether starting a business part-time or full-time makes the most sense for them. Whatever you choose to do, be sure to develop and use a time-management system that works for you and ensure that the time you spend working on your idea is productive. If you are serious about asserting your independence, you will find the time to make your idea into reality!

Take Advantage of Federal Contracts for Your Business Startup
Written by: K. MacKillop | Distributed: 2010-01-14 | Word Count: 653 | Page Views: 1887 | Votes: 3 | Rating: 2.33
Getting on board with federal, state or local government contracts can be a boon to your venture's bottom line. Spend a little time and effort and open up a new target market -- the government.

Starting Your Business Smaller Can Make Your Success Bigger
Written by: K. MacKillop | Distributed: 2009-12-03 | Word Count: 782 | Page Views: 1407 | Votes: 1 | Rating: 5.00
Does your business idea seem too big to take on? Will it require more startup capital than you can obtain? Don't give up on owning your own company -- there are ways to modify almost any business idea into something that can be started part-time and with less capital than the original plan. The most successful entrepreneurs tend to be very flexible and creative in getting where they want to go. Whatever you decide to do, get started on your planning as soon as possible!

Every Business Startup is a Series of Unexpected Events - Will You Be Ready?
Written by: K. MacKillop | Distributed: 2009-12-01 | Word Count: 847 | Page Views: 2036 | Votes: 1 | Rating: 4.00
No matter how seasoned an entrepreneur, every business startup has its share of surprises. Certain personality traits are advantageous in dealing with rapid changes, and developing these traits will help ensure the success of your business when faced with change.

All of Author's Articles on this site:

Most Recent "Business Offline" Articles

How To Build a Strong and Powerful Business During a Recession
Written by: Trey McMartin | Distributed: 2011-11-10 | Word Count: 987 | Page Views: 2969 | Votes: 3 | Rating: 0.33
During a recession, most business owners pull the reins on advertising budgets, fearful of what tomorrow might bring... Those who remain fearful have forgotten what made them the success they are today... They have forgotten that they have a God-given talent to overcome the incredible obstacles in their paths.

SEO Lessons from Local Businesses
Written by: Trey McMartin | Distributed: 2011-11-09 | Word Count: 945 | Page Views: 3605 | Votes: 3 | Rating: 0.33
More than once in the six years that I have been providing SEO services for websites, I have had the opportunity to discuss with individual business owners their search engine optimization needs. Now and again, I run across an individual business owner who is quick to say that SEO is absolutely worthless. When confronted with such an absolute statement, I like to press for details. It has been my experience that people who speak in negative absolutes will have a horror story to share.

Where Will FDA Target Next? What IVD Manufacturers Should Know Before Their Next FDA Audit
Written by: Norm Howe | Distributed: 2011-09-12 | Word Count: 706 | Page Views: 537
Medical device manufacturers are always interested in knowing what FDA's next area of focus will be. Well, if you're an In Vitro Diagnostic manufacturer you might review your measurement systems.

Online Fax - 10 Reasons To Get An Online Fax Service
Written by: Titus Hoskins | Distributed: 2011-09-12 | Word Count: 560 | Page Views: 542
Online faxing is the new more modern way to fax. If you or your company is not using an online fax service, here are 10 good reasons why you should get it.

Best Effort Essential for the Job Interview
Written by: Barbara Wulf MS, ACC, CPCC | Distributed: 2011-07-30 | Word Count: 676 | Page Views: 632
Interviewing will determine if you are the right person for the job. These tips will help you make the job interview a success.

Go Green With Your Career Search
Written by: Barbara Wulf MS, ACC, CPCC | Distributed: 2011-07-28 | Word Count: 636 | Page Views: 2288 | Votes: 3 | Rating: 0.33
Many of the qualities of green living, like recycling and sustainability, can apply to a career search, even if the career is not directly associated with green industries.

ReCareer in the Second-half of Life
Written by: Barbara Wulf MS, ACC, CPCC | Distributed: 2011-07-26 | Word Count: 525 | Page Views: 2525 | Votes: 4 | Rating: 1.50
Many of us worked the first half of our life to "fit" the job description. ReCareering is about finding the right fit, being selective, being creative, being fulfilled and being intentional about how you spend your time.

Up in the Air
Written by: Barbara Wulf MS, ACC, CPCC | Distributed: 2011-07-24 | Word Count: 678 | Page Views: 598
When looking for work or changing careers, go beyond researching on the internet and reading articles. Find out how you can learn from the art of listening and having a conversation.

Salon and Spa Owners: Which Monk Are You?
Written by: Dan Lok | Distributed: 2011-07-05 | Word Count: 477 | Page Views: 2715 | Votes: 5 | Rating: 1.20
Too many salon and spa owners are carrying around a lot hurts, regrets, guilt, past failures and fears about the future. But no one is forcing you to carry these emotional rocks, so put that sack down!

The Single Most Profitable Day You Spend on Your Spa or Salon!
Written by: Dan Lok | Distributed: 2011-06-30 | Word Count: 470 | Page Views: 3244 | Votes: 3 | Rating: 0.33
Salon and spa owners need to combine their marketing plan with marketing systems. A marketing calendar plans out strategies for a year, and is instrumental to the success of your spa or salon.

Most Viewed "Business Offline" Articles

How To Write A 300 Page Book In Four Months
Written by: Mark Silver | Distributed: 2008-07-15 | Word Count: 821 | Page Views: 38279 | Votes: 6 | Rating: 1.83
There's a lot of hoopla about becoming an author of your very own business book. The promise of fame and fortune is very alluring. Yet your book remains perpetually 'about to be' written. Meanwhile your business has ground to a halt. Hmmm... might there be a better way to get a book written?

The Best Marketing Book I've Ever Read (You'll Be Surprised)
Written by: Judy Murdoch | Distributed: 2007-05-09 | Word Count: 1522 | Page Views: 35180 | Votes: 15 | Rating: 3.60
From time to time someone asks me to recommend marketing books. Here's one of my favorite marketing books that always surprises people. Curious? Read on.

The Bizarre History Of The HOLLYWOOD Sign
Written by: Morris Timlen | Distributed: 2008-11-05 | Word Count: 1211 | Page Views: 32284 | Votes: 28 | Rating: 2.86
The most famous sign in the history of mankind is the one that graces the side of the hill above Hollywood, California. As famous a landmark as the Christ the Redeemer statue in Rio De Janeiro, the Eiffel Tower in Paris France, the Great Pyramid of Giza in Egypt, The Church of the Savior on Blood in Saint Petersburg Russia, and the Statue Of Liberty in New York City, the Hollywood sign is known around the world as the symbol of the American movie industry.

What Does It Take To Be A Successful Salesman?
Written by: Casey Moher | Distributed: 2008-08-05 | Word Count: 930 | Page Views: 24794 | Votes: 82 | Rating: 3.24
In the course of my average workweek, I meet people who tell me that they have no sales experience, and very literally, many will tell me that they could not sell if their lives depended on it. Do you fit into this mold? Do you seriously believe that you can sell me on the idea that you cannot sell things?

The Future of the Office Photocopier Industry
Written by: Jennifer Robinson | Distributed: 2010-07-29 | Word Count: 635 | Page Views: 12946 | Votes: 36 | Rating: 2.11
Since Xerox first invented and sold the first commercial photocopy machine companies and organisations have paid for use of the machine on a cost per copy basis. This has traditionally included full maintainance and toner supplied under a service agreement. In-fact the office photocopier is unique in the fact its one of the only pieces of equipment that comes without a warranty from new. But photocopier expert Online Connect UK claim all that is about to change.

Never Write A 'Thank You' Letter Again
Written by: Perry Maisin | Distributed: 2008-08-12 | Word Count: 971 | Page Views: 12542 | Votes: 20 | Rating: 2.30
When I was in graduate school, I had a friend who interviewed at fortune 500 companies and succeeded at landing a great job. One day, I saw him sitting in the student union with a stack of cards. The cards said 'thank you'. He opened each card and signed his name. The inside of the card was blank. I asked him what he was doing and he told me that it was important to send a 'thank you' to every person you interviewed with. He believed that that was the difference between getting the job and being passed over.

Selecting Between a 401(k) And 403(b) For a Nonprofit
Written by: Daniel Lamaute | Distributed: 2007-10-11 | Word Count: 333 | Page Views: 12443 | Votes: 20 | Rating: 2.50
Newly released IRS regulations impose several new requirements and fiduciary responsibilities on employers with 403(b) plans. While the regulations generally don't take effect until January 1, 2009, there are some provisions that apply sooner.

Top Ten Personal Habits
Written by: Laurel Vespi | Distributed: 2009-09-08 | Word Count: 427 | Page Views: 10947 | Votes: 10 | Rating: 2.40
Successful people have a regular routine of daily or weekly habits that reinforce the things that are most important to them. By practicing a set of personal success habits, they maintain a positive outlook, keep focused on their priorities, have more energy, and a greater sense of satisfaction with life.

Conducting Effective Career Aspiration Discussions with Employees
Written by: Andria L. Corso | Distributed: 2010-03-10 | Word Count: 690 | Page Views: 10450 | Votes: 10 | Rating: 1.50
Enhance your talent management and development programs through conducting career aspiration discussions with your employees. Find out where they want to grow their career to determine if it matches your business needs. This will enable you to differentiate your employee development to grow the future leaders of your company.

Pitch A No-Hitter With Baseball-Themed Flower Gifts
Written by: Wesley Berry, AAF | Distributed: 2007-12-25 | Word Count: 413 | Page Views: 9597 | Votes: 19 | Rating: 1.68
Want to send a gift to the baseball fan in your life that's sure to knock one out of the park? Send flowers with a baseball theme! Everyone loves flowers and when you personalize them to include the recipient's favorite hobbies, like baseball, they're sure to make an even greater impression.

Highest Ranked "Business Offline" Articles

Why Businesses Need Receivable Factoring In Cash Flow Management
Written by: Toby Seibert | Distributed: 2007-08-08 | Word Count: 866 | Page Views: 3766 | Votes: 5 | Rating: 4.60
In today's business environment, many businesses need to fine-tune the process of getting paid on invoices, in order to improve their cash on hand. Improving cash flow can be an ongoing challenge for businesses of all sizes, and it is an issue that must be addressed to ensure the long-term viability of the business.

Whose Restaurant Can You Find Online?
Written by: Rudy Vener | Distributed: 2007-07-09 | Word Count: 640 | Page Views: 3189 | Votes: 5 | Rating: 4.40
What is so significant about Pizza Hut's latest TV commercial?

Business School for Non-Business Minds: Got a NAICS Number?
Written by: Melissa Mashtonio | Distributed: 2008-04-15 | Word Count: 423 | Page Views: 3480 | Votes: 5 | Rating: 4.40
I’m a journalist. I spent a lot of my career in the news business. As my career has progressed, I’ve spent time at small and large companies, and I have sat through dozens of business meetings wondering what the heck the “money” people are talking about. They used acronyms as if they were a foreign language.

The Problem With Swiping Sales Copy
Written by: Scott Bywater | Distributed: 2009-12-03 | Word Count: 480 | Page Views: 2779 | Votes: 5 | Rating: 4.40
This is what people miss when they try to simply "swipe" sales copy from another advertisement.

Equal Opportunity Pizza Ordering
Written by: Rudy Vener | Distributed: 2007-10-19 | Word Count: 629 | Page Views: 3300 | Votes: 8 | Rating: 4.38
With online ordering, your menu and restaurant suddenly become accessible to both the deaf and blind customers in your community.

The Secret To Making Successful Business Connections
Written by: Kate Smalley | Distributed: 2006-10-11 | Word Count: 672 | Page Views: 3361 | Votes: 6 | Rating: 4.00
If you have a hard time making successful business connections, don't despair. Anyone can be good at meeting people-if they use the right technique. The whole secret to making a positive connection is knowing how to attract people and inspire them to want to give you a chance.

How to Build a Really Great Business? (Super Success Secrets from a Legendary Business Master)
Written by: Chet Holmes | Distributed: 2007-01-15 | Word Count: 1523 | Page Views: 3600 | Votes: 7 | Rating: 4.00
Times are tough. The economy is in a constant state of upheaval. Is your company doing better than most? Are you placing greater emphasis on pure performance?

Online Copywriting Makes Content as the King
Written by: Steven Gerber | Distributed: 2006-12-11 | Word Count: 560 | Page Views: 3802 | Votes: 7 | Rating: 3.86
The inverted pyramid is basically the placing of 4 W's in the primary sentences of the articles, supported by the other W and H on the following discussions. Four W's consist of what, when, where, and who. The other W which stands for why on the other hand, follows on the succeeding paragraphs, including the elaboration for the H which also stands for how, if necessary.

Interview Coaching: A Home-Based Business on the Cutting Edge
Written by: Carole Martin | Distributed: 2007-08-24 | Word Count: 1400 | Page Views: 3466 | Votes: 7 | Rating: 3.86
You name it - Blackberry, Skype Connection, Cell Phone, iPhone - these are the tools of this trade. Who would believe that someone with a home-based business could reach out to someone in a far away country and work with a client via a Blackberry and a cell phone?

Do You Know Where The Real Profit Pools Are?
Written by: V Rory Jones | Distributed: 2006-11-07 | Word Count: 6028 | Page Views: 7399 | Votes: 6 | Rating: 3.83
Ever had that feeling you've got a great business, but that its' not delivering the results it really deserves? More likely than not, you do have a great business - it is simply that its strengths are not being directed towards the right opportunities, or that those opportunities are not being well exploited. This discussion outlines a new approach to market strategy - an orientation around 'cash-based' Profit Pools. In it, we outline what the right opportunities are, how to find them, and how to exploit them.












Download an eBook today
 
Directory Navigation
Locate By Author

Locate By Category:
ALL Categories
Arts & Crafts
Arts & Entertainment
Automotive
Business - Offline
Business - Online
Career
Computers
Education
Family
Finance
Food & Drink
Health & Wellness
Home & Garden
Humor
Internet
Nature & Pets
Real Estate
Religion
Self Improvement
Shopping
Society
Sports & Recreation
Technology
Travel & Leisure
Uncategorized
World Events
Writing & Speaking

Change Number of Results:
50 - 100 - 200 - 500
Article Reprint Rights
Creative Commons License

This work is
licensed under a
Creative Commons
License


You are not required to show the creative commons license notice when you reprint this work.
Article Publishing Tools
Print Article
Email-to-Blog
HTML Source Code
Text Newsletter Format
Link Back HTML

Blog Publishing Tools

Internal ID: #7282
Article Statistics
Word Count: 830

Total Views: 7680

Article Rating: 1.55 of 5
Votes Cast: 11

More Articles By Author:




Article Title Search:

Widow Search
Right Blinker
Google
Yahoo!
Zuula
Bing
Cuil

Last Distribution Date:
2010-01-13 12:45:00






All Articles are Copyright © 2001-2017 of the Defined Authors.

All other material and images on this site are:
Copyright © 2001-2017, ThePhantomWriters.com