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Home-based businesses may be handmade products, home-based catering, event planning, consultancy or any other business they are still businesses, and as such a financial accounting is needed for several reasons. Taxes are one of the most important reasons for a home business to keep accounting records to show money made and money paid. There are several ways to do accounting, and your knowledge of accounting practices is not a roadblock.
Some small business owners think that since they work from home, income and expenses do not need to be tracked, but this is totally untrue. Even if your business is home-based the tracking is equally important as a corporate system. Keeping account books and records can be done with a variety of accounting software available online. This type of software has easy to understand spreadsheets that make it very easy for a small home business owner to balance books and get an idea of the profitability of their home business.
The software for these applications is made by a variety of trusted manufacturers, and some of these programs even have fields for important tax return information for the end of the year.
These software programs greatly simplify bookkeeping for home businesses, even for someone with no accounting experience. So why wait for accounting? Some home business owners prefer to do things the old-fashioned way, with a pencil and paper. With computer hackers and viruses out there, some owners would prefer not to keep their financial records on their computers. In this case, a general accounting ledger with three columns will work as effectively as the expensive software.
One column can represent money that is received for the home business, one column can be used for money that is paid out on behalf of the home business, and one column can be used to keep the running balance of your home business. This accounting system is easy to use and follow, because each day every transaction is recorded in the ledger. The ledger is also an important record for the tax preparation of your home business at the end of your fiscal year.