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Absorb the fundamental rules of accounting

Study the basic rules of accounting, known as GAAP or general accepted accounting principles. These international rules are the guiding principles behind all accounting laws, reporting requirements and software programs. Although there are minor modifications and differences between countries, all international accounting training programs teach these principles and they are used every day in accounting.

I recommend: Learn the guidelines and recent changes from the US GAAP website. The Principles of Accounting website provides quizzes, checklist and study guides to assist with the absorption and understanding of these guidelines. Only by thoroughly studying GAAP, can you begin to understand the current laws and to see the weaknesses and strengths in the current accounting system. Recent legal scandals have shifted the onus onto the business owner to ensure compliance with accounting laws.

Read about business accounting information

Stay up to date on accounting changes by subscribing to accounting newsletters and magazines. Accounting laws and regulations change constantly and it is very important to stay up to date. The business accounting firm is responsible for providing advice to business owners, and so the information must be current.

I recommend: Subscribe to the newsletter provided by the American Institute of Certified Professional Accountants to keep up to date on trends in the industry. Look at the list of publications available on Web CPA and subscribe to the ones that are relevant to your practice. For more accounting news, check AccountingWEB and The CPA Technology Advisor.

Stay current with business accounting seminars

Refresh your skills in accounting information software and other industry standard tools by attending accounting seminars. These sessions are a great way to network with other accounting professionals, expand your scope and learn new things about accounting solutions. Use these seminars to improve your contact list of accounting related professionals.

I recommend: Review the courses offered on Start Here Go Places to keep your business accounting service and credentials up to date. Look at the list of sessions offered by Accounting Seminars to stay in touch with colleagues.

Helpful advice for making the most of this Guide

• •  Schedule time each week to focus on accounting news and trends in the industry. It will improve the quality of service to your clients and keep your interest and engagement high.

Guide to Cash or Accrual Accounting

How to decide which accounting method best fits your needs

By Kay Bell, Owner, SKB Editorial Services

1. Understand the requirements of each method
2. Examine accounting software
3. Consider hiring a professional bookkeeper

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Accounting 101

Basically, the two accounting methods differ only in the timing of when transactions are credited or debited. In practice, though, accounting is rarely basic.

I recommend: You can find good primers on the accounting methods at Nolo.com, Business Owner's Toolkit, Inc.com and American Express. You can print out a PDF version of this guide to cash vs. accrual accounting provided by Texas A&M University to read at your leisure.

Computerize the process

Unless you're running a micro-business, you probably have your accounts on computer. But does your current software meet your accounting needs? And will it allow you to change as your business grows?

I recommend: Top Ten Reviews looks at the pluses and minuses of, you guessed it, ten business accounting programs. The Logos accounting program also provides a side-by-side look at some factors to consider in deciding whether to use the cash or accrual method.

Hand over the books

Regardless of whether you choose the accrual or cash accounting method, you'll probably find that hiring an accountant to keep track of the numbers is a worthwhile expense.

I recommend: Gaebler Ventures and is4profit each offer tips on how to hire a business accountant. The first recommendation is to ask for local referrals. But you also can find business accountants via the practitioner search engines at Accountants World, GoodAccountants and the National Society of Accountants.

Helpful advice for making the most of this Guide

• •  Make sure you understand the financial and tax implications of the accounting method you choose.
• •  When considering a computer accounting solution, look for one that supports your entire company - sales, service, accounting - so that you can integrate all your financial applications.
• •  Make sure the accountant you choose is a business accountant. The needs of individuals are much different than those of a business.
• •  In that same vein, look for an accountant who knows the needs of your particular industry.

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Investigate full service accounting firms

Review the services provided by an international business accounting firm. There are about 10 major accounting companies that dominate the accounting industry. These firms hire the brightest students directly from university to be business accountants.

I recommend: Full service accounting firms provide a wide range of services from tax advice, to audit services, to business process consultation. In the accounting industry, Deloitte and Price Waterhouse Coopers are two of the major firms. Both have international operations and a reputation for quality work and dedication.

Look into a business accounting firm

List the services that you require from an accounting firm. Most small to medium business needs are managed by an accounting service firm. These companies specialize in tax filings, setting up accounting information systems and providing business advice to owners throughout the year.

I recommend: Meet with a senior staff of the accounting service company that you are looking to hire. Check for accounting designations for the partners and accountants. Discuss your specific needs and ask for a list of references. Follow up on the references, including contacting the accounting association to ensure there are no complaints. Frost, Ruttenberg and Rothblatt and Account Services are both excellent example of a typical accounting services firm.

Research accounting software

Accounting information software has completely changed the accounting industry. All accountants must have a high level of skill with a wide range of computer software packages and systems to function as accountants. Each accounting firm must be able to respond quickly to clients requests and be able to work with all types of systems, large and small.

I recommend: Implementation of accounting systems has become a large part of the accountants role. Download Sage Business Vision and Everest Software to understand how they work. Discuss the software options with your accounting services firm before implementation.

Helpful advice for making the most of this Guide

• •  Write an engagement contract with your accounting firm with a clear list of deliverable, expectations and billing rates. Accountants bill by the hour, just like lawyers.

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Tax free

When investments are tax free, the earnings are never taxed. However, there are some exceptions to tax-free items. To illustrate, municipal bond fund dividends are not going to be taxed at the federal level. Nonetheless, individuals may still have to pay capital gains taxes if the municipal bonds are ever sold for a profit.

I recommend: The tax free holidays for 2009 can be found at About.com.

Abatement

An abatement is the term used to describe the complete removal of an amount due. In many cases, an abatement is used in reference to a tax, penalty or interest abatement.

I recommend: A straightforward analysis and guide to abatement can be found at WiseGeek.com.

Income tax basis

An income tax basis is used to determine the proper and correct amount of gain that should be reported when a particular asset is sold. In most instances, the income tax basis will be the cost that has been paid for the asset in addition to the money paid to improve the asset(s), minus the deductions taken against the asset.

I recommend: Common issues with respect to income tax basis are discussed at Online-Financial-Planning.

Generally Accepted Accounting Principles

Generally Accepted Accounting Principles, which is abbreviated by the acronym GAAP, include the conventions, concepts, rules and procedures necessary in the world of accounting to define the accepted accounting practices at any given time. The highest possible level of these types of principles is set in a league of its own and determined by the Financial Accounting Standards Board, or FASB.

I recommend: FASAB.gov goes into great detail explaining and reviewing Generally Accepted Accounting Principles.

Net income

Net income, in terms of a company, is the total amount of sales attained by the company that remains after all costs are subtracted from the amount. The net income is used to express the total sales at any particular time. It is a very important figure for companies, and it's the best possible measure when it comes to the company's current operating state.

I recommend: Data and an explanation of net income can be found at WikInvest.com.

Securities

'Securities' is a very general accounting term used by professionals and others in the world of accounting. It is used to describe publicly traded stocks, bonds and other instruments of finances.

I recommend: For detailed information on securities, review the information available at BLS.gov.