consulting firms

Accounting 101 Lessons - Beginners and experts

By Anne Carpenter 1 August, 2023 3 mins read

Accounting 101 lessons can be useful for people who have no previous knowledge of the field. For those with a strong accounting background, it can be used as a refresher course. The topics covered include net worth, accounts receivable and double-entry accounting. These concepts will be useful for your business.

Accounting for double entries

Double-entry accounting is a basic method of recording business transactions. It involves adjusting balances in a certain way to reflect the value of accounts and to maintain an equal balance between assets or liabilities. It employs the concept of an account that is both an asset as well as a liability account. The asset represents cash earned and the liability represents the amount owed.

This method is also much more accurate. It is ideal for small businesses looking to obtain loans, or organizations who want to keep accurate financial records. This helps to track the company's growth, since every business transaction must also be recorded in two accounts. Each account must contain debits and credit equal to the total assets and liabilities plus equity.

Accounts Receivable

A business's owing money to customers is known as accounts receivable. It involves the process of invoicing customers and pursuing and processing payment. A furniture manufacturer might deliver furniture to a retailer and then record the payment under accounts receivable. The furniture manufacturer then waits until the retail store pays him.

To make sure that your customers make their payments on time, make sure to display your payment terms prominently on your invoices. If customers do not know when they must pay, they will not make their payments. Customers can be reminded when accounts are past due by using accounts receivable reporting.

Net worth

The company's net worth is the measure of its assets and liabilities. Assets include cash, property, inventory, machinery and buildings, and loans made to other people. Liabilities, on the other hand, include all of the company's debt obligations. In order to calculate net worth, both items must be present.

A company with a positive net worth indicates that they are in a good financial situation. Negative net worth is cause for concern. A person's financial health can be affected if their net worth drops. Consider a newlywed couple with a $300,000.00 house, $50,000 in investments, and $10,000 for a car loan. While the couple's net worth and liabilities are positive, they have negative liabilities.

Basic accounting concepts

Regardless of the type of business you run, you must understand some of the basic accounting concepts. These concepts allow you to create an accurate financial statement. It is important to be able to recognize revenues as well as expenses when they occur. Contrary to cash-based accounting that recognizes money as it is received, accrual accounting tracks transactions as they occur.

These accounting principles make financial statements easier to understand. If you use the same currency for purchases and transactions, it will make your financial statements easier to understand. It would be wise to report your transactions in the U.S. dollar if your business has its headquarters in the U.S. If you are based in Japan, your transactions would be converted from the Japanese Yen (or USD) to U.S. dollars.

Accounting basics can provide many benefits

It is an excellent way to gain a deeper understanding of the business world. You will be able to make better financial decisions as well as negotiate better deals. Understanding how to read financial statements will allow you to make informed decisions about which stocks or investments to purchase.

The best way to learn accounting is to do your homework. Assignments are available in study guides and textbooks. You may also find them from your teacher. It can be tedious to study so make sure you know how to maximize your time. A great way to study is to buy textbooks and read them thoroughly.

If you liked this article, check the next - Almost got taken down

FAQ

What can I expect of my consultant?

Once you select your consultant, you should expect to hear back from them within a few days. They will usually ask for information about your company, including its mission, goals, products, services, budget, etc. They will then send you a proposal that outlines the scope of work and estimates timeframe, fees, deliverables, milestones and other details.

If everything is in order, then the parties will enter into a written contract. The type and content of the contract will vary depending on whether the relationship is employer-employee/employer-independent contractor.

If everything goes as planned, the consultant may begin to work immediately. S/he will have access to your internal documents and resources, and you'll have access to his/her skills and knowledge.

But don't assume that anyone who is a consultant has all the answers. To become an expert in any field you consult, it takes practice and effort. Don't expect your consultant know everything about your company.

What happens after the consultant has finished the job?

After the consultant has completed the work, they will submit a final document detailing the results. This report includes the deliverables and project timelines.

After that, you'll go through the report and decide if it meets your expectations. If not, you can either request changes or terminate the contract.

Why would you want to hire consultants?

You might need consultants for a variety of reasons.

Your organization may have a specific project or problem that needs solving
You want to improve or learn new skills.
It is important to work with an expert on a subject area
The task is yours alone.
You feel overwhelmed with all the information you see and don’t know where it is.
You cannot afford to pay someone fulltime

Referrals are the best way for you to find a qualified consultant. Ask your friends and colleagues if they know of any trustworthy consultants. If you are already acquainted with someone who works as an advisor, ask them for recommendations.

You can use online directories such as LinkedIn to find consultants in your local area.

What qualifications does a consultant need?

Not only is it important to have an MBA but you should also have business consulting experience. You should have at least two years of experience in consulting and/or training for a major company.

You should have had experience working with senior management to create strategy. This would require you to be comfortable with presenting ideas and getting buy in from clients.

Additionally, you will need to pass a professional qualification such as the Chartered Management Institute Certified Management Consultant (CMC).

How does consulting differ from freelancing?

Freelancers are individuals who work for themselves and offer their services to clients. Hourly rates are usually charged based on the time they spend working on a client’s project. Consultants work for companies and agencies that employ them. Consultants are typically paid either monthly or annually.

Consultants often have more flexibility, while freelancers can choose to work when they want and set their own rates. Consultants often offer better benefits such as vacation days and retirement plans, health insurance, and vacation days.

Statistics

My 10 years of experience and 6-step program have helped over 20 clients boost their sales by an average of 33% in 6 months. (consultingsuccess.com)
According to IBISWorld, revenues in the consulting industry will exceed $261 billion in 2020. (nerdwallet.com)
67% of consultants start their consulting businesses after quitting their jobs, while 33% start while they're still at their jobs. (consultingsuccess.com)
"From there, I told them my rates were going up 25%, this is the new hourly rate, and every single one of them said 'done, fine.' (nerdwallet.com)
On average, your program increases the sales team's performance by 33%. (consultingsuccess.com)