Devoted to WAHMs -Work at Home Moms

These is the second in a series on Business Basics. The first post in the series can be found here.

What method of accounting do you use for your work-at-home business?

If you've just started out, then odds are that you use a single-entry bookkeeping. A single-entry accounting system is pretty much the way that most people their checkbooks - they make an entry when cash comes in or goes out, and that's it. One entry per transaction - that's single-entry bookkeeping.

This is what most of us are familiar with, so this is how many of us start.

What is Double-Entry Accounting

However, as a business owner, you should consider using double-entry accounting. According to wikipedia , double-entry accounting is when:

"each transaction is recorded in at least two accounts. Each transaction results in at least one account being debited and at least one account being credited, with the total debits of the transaction equal to the total credits."

Double-entry accounting has some distinct advantages:

• It is a method that is univerally accepted in business. If you are audited (or need to enage the services of an accounting professional) then this is the method that they will expect to see.
  
  
• It is more accurate.
  
  
• It makes it easier to produce financial statements (which you will need if your business ever takes on investors).

How does double-entry accounting work?

Let's say that your business purchases supplies using cash. Under a single-entry method of accounting, you would simply subtract the cost of the supplies from your cash balance.

However, under a double-entry method of accounting you would increase (debit) the office supply expense, but then you would decrease (credit) your cash asset account by the cost of the supplies.

If you purchase a computer accounting system, then I highly recommend that you make sure that it can accommodate double-entry accounting (not all of them can).
 
Want More?

• From about.com
  
  
• From the craft and fabric links website - a free business book
  
  
• From WikiAnswers

(Note: This series is not intended to provide specific professional advice on the business topics covered. If you feel you need additional help in any particular area for your own business, then you may need to consult a professional.)

You can help with this series by suggesting additional topics that you would like to see covered.

Just leave a comment or send me an e-mail.

Also, feel free to comment on your own experience with any of the topics.

Image Source: Laura Spencer of WritingThoughts