Accounting is the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results. It is the measurement, processing, and communication of financial and non-financial data of economic entities. The task is tiresome since it requires a great deal of hard work and concentration on the part of the person concerned. So, we came up with a few hacks to help make accounting less tedious and more enjoyable.

• Understanding Accrual Vs. Cash Accounting

There is a significant difference between the Accrual and Cash basis of accounting. All the expenses that are incurred in a year, including those expenses whose payment has not been done yet or for which payment has been made in advance in the earlier year(s), should be included in that year’s profit & loss statement. Similarly, it is essential to book income in the year in which the goods or services are provided whether or not the consideration is received for the same or in case the consideration was received in advance. This helps to recognize correct revenue earned and expenses incurred during a particular financial year.

• Regular Tracking of Bank Statements

If an accountant allotted 20 minutes weekly to download their business’ bank and credit card statements and plot the nature of all the transactions against each entry, the process will become more organized and easier to access. The result of this hack will astonish you;  This process requires only 20 minutes a week and will save you a lot of time. This is a very straightforward way to maintain accounts.

• Tracking Incomes Received in Advance

It is essential to understand that the money received in advance for goods or services yet to be provided/rendered is not considered income. For example: If your business model is to receive money upfront and provide services over a period of time (say over a period of three months), then the advance received would be booked as income proportionately over the period of three months. It is better to maintain a database that could help track the date on which the money is received today and the period over which it needs to be recognized as income. This helps to have organized documentation that gives a glimpse into the actual revenue and liabilities of the company and the remaining period over which the services are to be rendered.

• Tracking Prepaid and Postpaid Expenses

In a business, just like incomes are received in advance, in some cases, there could also be expenses whose payment is made upfront for a certain period, for example, consider website subscriptions. Also, there are some expenses that are paid for at a later date on completion of a specific assignment, This can lead to confusion regarding the actual expenses of the company for the particular financial year. To streamline the accounting of such expenses, it is best to maintain a well-organized record of all such expenses to know the period over which they need to be recognized. The money paid in advance for services yet to be received is not to be booked as an expense but recognized as an asset. It will be booked in the profit & loss account only when the expense becomes due.

• Maintaining Appropriate Documentation

In today’s complicated world, one of the most common mistakes people make is failing to recognize the importance of a document and then regretting it afterward. So, it is of utmost importance that no matter how insignificant a document seems, if it is related to your business, you must adequately and safely retain it. It could be required in the future for a variety of purposes, including balancing your accounts, determining tax responsibilities, and even claiming tax deductions.

•  Pre-Incorporation Expenses

Keeping track of every expense made related to the business is vital. Even money spent on setting up a business forms a crucial part of the profit/loss of the business, and therefore, it is entitled to a tax deduction. The tax deduction is subject to relevant laws, but overall, for tax purposes, it is essential to track all expenses incurred while setting up a business.

• Accounting and Bookkeeping Software

Accounting and Bookkeeping are often maligned because of the data entry involved. However, today’s cloud-based accounting software takes most of the tedious tasks out of accounting. The choice of accounting software varies depending on the size and nature of the business and the industry you are engaged in.

•  Seeking Professional Assistance

If accounting still seems like a difficult task or feels impeding and confusing, the best option is to hire a professional accountant. A professional accountant possesses expertise in the field of accounting and bookkeeping and manages the accounts of a particular company. This helps you focus on other critical aspects of running and expanding the business/profession without getting into the nitty-gritty of everyday accounting.