However, the manual process isn’t for everyone, especially with the government introducing the Making Tax Digital (MTD) initiative. Accountancy software packages save time, money, and effort by helping you record all your transactions. If you’re managing your business with the single-entry method, a CPA can help you move to the double-entry method.

Accurate bookkeeping is essential once you start your business: you could be audited by the government at some point and you need to be confident that everything you are filing is meticulously recorded and precise. Liabilities include everything the company owes to others, such as vendor bills, credit card balances, and bank loans.

A current ratio under 1 is considered a danger sign because that indicates the business doesn’t have enough cash to pay its current bills.

She is the author of Creating a Business Plan For Dummies, Second Edition, Small Business For Dummies, Fourth Edition, and Bookkeeping For Dummies, Australian Edition. p>

Christopher Cottier, BSc, MBA, is a senior investment advisor based in British Columbia. Using basic bookkeeping principles, you can post and access information that managers need to make decisions.p>\n

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Account Type	To increase this account	To decrease this account
Asset	Debit	Credit
Liability	Credit	Debit
Equity	Credit	Debit
Income	Debit	Credit
Expenses	Debit	Credit

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With a bit of practice, understanding financial statements is easy.