Setting up a business is easy but maintaining is quite difficult. To maintain a business all we need is good maintenance of financial data. ECommerce accounting is all about organizing the financial data of a business. It includes the accounting tasks and bookkeeping for your business which is mandatory to keep, knowing all the details of the purchase, sale and overall health of your business. ECommerce accounting is important to analyse your business in every aspect. In this article, we are going to let you know all about eCommerce, accounting and its role in business.
ECommerce Accounting is all about collecting, organizing and reporting the financial data of a business. It holds the major part of any business as it gives a clear analysis of all the financial data. The main goal of eCommerce, accounting is to report, bookkeeping and submit tax returns. It helps in predicting business decisions.
2. Types of Business Account in eCommerce Accounting
There are four types of business accounts in eCommerce Accounting
Checking Account
A checking Account is used for day-to-day cash deposits. This money can be used by a debit card, online transactions or through writing checks. By using a checking account one can access their money in various ways. A checking account has a lower interest rate as compared to other accounts.
Savings Account
As it is clear from its name in saving accounts, one can save money and get interested in deposited money. It has a limited number of withdrawals. One can keep their funds in the savings Account for keeping it safe. Funds from a savings account will help you in your business when you need them.
Money Market Account
A money market account is the same as a savings account, but it provides a higher interest rate on deposits as compared to a savings account. A Money Market account gives a limited number of withdrawals from the account. This money can be used via writing checks, online transfers or through a debit card.
Certificate of Deposit
It is an agreement between the bank and the account holder for keeping their money in the bank for a fixed amount of time. It is like a savings account. It gives a higher interest rate on deposited money. It has one drawback that holder can't access their money before the completion of the determined time.
3. Financial Statement in eCommerce Accounting
To make financial decisions it is essential to take good care of your business costs and financial data. These statements are written records that tell the performance of the business. Three major financial statements are given below.
Income statement
The income statement is essential for having clear information about the profit, and loss of your business over an accounting period. It helps the owner to predict future decisions. With the help of an income statement, one can analyse their business growth. The income statement is an essential part of business growth. It reports the income of a company in a particular period.
Balance sheet
A balance sheet is a financial statement that tells the liability, assets and financial status of the company. Like an income statement, a balance sheet is also used to evaluate the whole business. A balance sheet is based on the simple formula that is :
liability = Asset + Equity
The balance sheet can be considered as the statement of the net worth of the company.
Cash Flow Statement
The cash flow statement tells the flow of incoming and outgoing cash in a company. It reports the cash produced or used by the organization at a particular time. The cash flow statement includes all the details of the company that how money is produced and how it is used. It states the overall health of the company. Cash flow from operating, investing and financing activities are the main three elements of the cash flow statement.
4. eCommerce Accounting Task
Inventory management is an essential part of any business. Tracking your inventory is based on the size of your business, your products and your budget. In today's era, one can opt the digital tools to manage their inventory rather than going for a traditional method. There are so many online tools that help to track inventory. Organize your inventory report by stocks and their description so it would be easy to analyze it at the end of the month. One should use online software to track inventory for better understanding.
Maintaining a budget is so important. One should keep an eye on the sales, purchasing, inventory, banking and overall financial costs for managing the overall financial status of the company.
By analyzing expenses business holders can save money if a company is spending money on unnecessary things and this saved money can be used later in case of emergency. Do an in-depth analysis of previous tax, purchasing, receipts, EMI, Bills and so on.
It is very important to keep records of your business details. Business holders should have previous year's tax reports, invoices, bank statements, Bills, receipts, credit card and debit card statements.
If the product is returned to your business then you should have a detail of that product’s transaction in the return transaction list.
Paying your tax according to the size of your income is lawful and it should be done on time, individuals can also file ITR if they have paid more than the required tax.
Track the cash flow in your business to reduce unnecessary expenses.
Wrapping up
eCommerce accounting is easy to maintain if you opt for the correct strategy. One can go through digital software and apps to maintain eCommerce accounting efficiently. By maintaining and tracking financial records one can enhance their business and predict better decisions for the future.
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