Small business owners who learn about financial accounting theory are able to assume an active role in the financial welfare of their business. Knowledge of the accounting model will enhance your understanding of assets, liabilities, net worth, revenue and expenses. You’ll find yourself recording transactions like the earning of revenue, payment of expenses and purchase of assets with greater accuracy. The major sections of your income statement and balance sheet will make sense because you will know the origin of the numbers listed.

Understanding the theory of accounting will help you calculate financial ratios. Using these numbers you can gauge the success of your operation and adjust your business decisions accordingly. With a grasp of the theories of accounting you can profit from the financial advice your accountant provides rather than simply react to it. Consider the following as you increase your knowledge of accounting theory to benefit your business:

1. Evaluate your past experience with accounting theory to determine the level of education you require.

2. Determine what computerized accounting tools will help you put accounting theory into practice it at work.

3. Explore hiring an accountant who specializes in applying theories of accounting to small business.

Action Steps
The best contacts and resources to help you get it done

Find online educational courses covering basic accounting theories and principles

The Internet has online accounting courses. Some are available for moderate sums and others are free. The courses target a wide range of accounting backgrounds.

I recommend: AccountingCoach.com has free online educational material designed to help you learn basic accounting concepts used in the United States. The course is geared toward those with no prior knowledge of accounting. UniversalClass has affordable online classes covering a multitude of topics including an introductory course on accounting theory analysis and finance.

Buy web based accounting software to apply accountancy theory

Accounting software will help you stay compliant with generally accepted accounting principles and can assist you with office operations. Look for products that address bookkeeping, purchasing, inventory, billing, payroll and financial management.

I recommend: TAD Accounting, NetSuite and Microsoft Office Online offer comparable accounting software for small businesses. Both NetSuite and Microsoft Office Online offer their products for free trial periods.

Hire an accountant who specializes in accounting theory and practice geared toward small business

All business owners can benefit from the counsel of a good accountant. Besides word of mouth, professional accounting associations and networks can be a good source for finding one in your locale.

I recommend: The Professional Association of Small Business Accountants and Microsoft Professional Accountants Network provide searchable databases of their membership sorted by state and zip code respectively.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Encourage your employees to join you in learning about accounting theory. Their new knowledge will likely translate into greater concern for the financial success of the business.