User:AYEllis/sandbox

Basic Accounting for a Sole Proprietorship Tips

If you have been given the task to attend to the accounting needs of a business the following tips will help you correctly post the information. Before making an accounting entry you must first analyze the accounting transaction. There are some steps you should follow: Identify the accounts affected by the transaction. Classify the accounts and determine if the accounts affected is an asset, liability, or owner's equity account. Determine if the account will increase or decrease. Make the accounting equation is balanced. Let's clear up some definitions to help this process go a lot smoother. Assets are the items owned by the business such as cash, furniture, office supplies, computer equipment, etc. Liabilities are the financial claims of the creditors. The items in this category are products or services that the business has not paid in full on purchased on account. The owner's equity is the financial claims of the owners. Simply put it is the assets minus the liabilities of the business. The accounting equation is as follows: A = L + OE (Assets = Liabilities + Owner's Equity). Please remember with each transactions at least two accounts will be affected and fall within one of the three categories.