In the world of accounting, we stand on two principles; timely and accurate information for the client. Without either, the client can’t make good decisions. As accountants our job is to record economic transactions and report this information in a financial format. For the client it is imperative that the information is provided in a reasonable period of time after the activity.
Simply put, this is a tax on your net earnings from your small business operation. If you are unincorporated, you have to pay this tax. This includes those in partnership arrangements, and in any form of Limited Liability Company status. So why don’t corporations pay the tax? Actually they do, it’s just called a different name.
I had the privilege of meeting a potential client in one of those business gatherings. I asked him the usual questions and he started to explain his business operation. Well, he was basically a landlord to a gaming function. When I become fascinated by the enterprise, I reoriented my questions to some specifics. Sure enough he charges some high end prices for the facilities. Man, I needed to figure out how he was able to do this. So with some prodding, he finally explained that his marketing approach pretty much gave him “A license to steal”.
Simply stated, accounting is the measurement of economic activity. Its primary principle is to report information to the user so that (s)he can make informed decisions. The primary reporting format is in the form of dollars. There are two important reports used by pretty much 99% of all business operations to determine the status of the business operation. These are the income statement and the balance sheet.
If you read my section on ‘Do I Need a Business Plan’ and followed those steps, you are now ready for the next step in this process. Hopefully two important barriers have been breached in your quest to be the next new business. First, you have answered the most important questions of who am I and is this what I truly want to do.