Your Quick-Start Guide on book keeping for Small Businesses in Kuwait

Few small business owners are accounting experts, yet knowing how to perform accounting for a small business might help you succeed.

Accounting is critical to the success of any organization. It assists the company in tracking revenue and expenses, claiming lucrative tax deductions, adhering to numerous regulations and loan covenants, and providing information to investors, managers, and other stakeholders to help them make better business decisions.

Accounting for a small firm is mainly made up of two components:

1. Bookkeeping. The practice of recording and tracking your company’s financial transactions is known as bookkeeping.

2. Financial statements. Financial statements are reports that summarize transactions and illustrate how the business is doing.

Let’s take a closer look at each of these elements.

What is the best way to perform accounting for a small business?

Here are some simple procedures to help you get started tracking financial data for your small business, preparing financial statements, and filing taxes.

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Step 1: Decide on your accounting method.

The method you’ll employ to record financial transactions is one of the first accounting decisions you’ll have to make in your small business. The following are the two most common accounting methods:

• On a Cash basis. When money changes hands, you record revenue and expenses using the cash accounting technique. For example, only when a consumer pays you do you record revenue from a sale.

• On Accrual basis. You record income when you make a sale and expenses when you incur them using the accrual accounting approach, regardless of when money changes hands. When you sell to a customer on credit, for example, you record revenue even if the consumer doesn’t pay the invoice for 30 days or more.

Although the cash basis is simpler to use, the accrual method of documenting transactions provides a more accurate picture of actual revenue and expenses over time. Most small businesses that don’t carry inventory choose the cash basis. Large and inventory-heavy businesses may need to use the accrual method.

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Step 2: Establish a business bank account and credit card.

Open a company bank account and a business credit card, and use those accounts to handle all of your business’s income and expenses instead of your personal checking account or credit card. Keeping a clear record of company activities is much easier with a separate bank account.

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