Accounting is defined as the “action or process of keeping financial accounts” and is an extremely important feature for individuals and especially businesses. No matter the type of work you complete or business that is being run, if there are more parties than one who are responsible for putting money into the operation of an organization, then providing an accounting option to serve for monitoring where and how funds are being used is critical.
Even for smaller businesses that may be run solely by family members, a small number of trustworthy individuals, or friends who have known one another their entire lives, the benefits of having an accountant can still be helpful. Understanding why your business needs an accountan
t is only the first step in the process of providing accurate record keeping. Afterwards, there will be other questions to answer, including what type of accounting method will be used for reporting purposes.
There are currently two main options available, with the third being a combination of the two accounting processes from which to choose.
The cash method of accounting is used primarily by smaller businesses and relates to keeping up with the flow of monies in and out of an organization. Recording revenue, income for the business, when cash is received and noting expenses when they are paid in cash keeps up with the financial part of the business.
is not available for C type corporations, leading to the other accounting method option.
Accrual accounting utilizes the investments made, in addition to revenue and accounts payable or receivable to establish a financial bottom line. By counting non-cash based incentives and other liabilities as assets a broader description of an organization's current financial standing can be established.
The accrual method is often recommended for larger companies and the Internal Revenue Service states it must be used for any C companies.
For non-C companies and other entities, a combination of cash accounting and accrual accounting can sometimes serve in the best interest of all involved parties. For any that have other partners outside of a direct line with the company, a manageable way to account for the funds within an organization is critical.
The tax experts at Bloch Rothman and Associate
s are ready and able to assist you with establishing an accounting practice for your business, complete tax returns, or answer any other factors associated with issues or concerns you may have. Serving in Denver and all of the surrounding areas for 35 years, our firm has an extensive history in helping clients with any and all of their tax issues or dealings with the Internal Revenue Service. If you have questions about your personal, business, estate or any other filings, don’t hesitate to contact us
today. Available for all of your tax needs and filings, there are also a number of bookkeeping and payroll services offered to assist you and your business. We look forward to meeting you and serving whatever your needs may be soon!