Establishing Accounting Practices

This research describes how to establish successful accounting practices for a small retail outlet that does not require the services of a full-time accountant. Poor financial record keeping is recognized as one of the major factors of small-business failure in the US (Converso). Although business owners may keep receipts and similar paperwork on hand, the attitude toward records is often negative because they are considered necessary evils in keeping with government oversight and tax planning. But Ragan (4) makes the point that business records are actually a tool of business management. By consistent updating of and reference to various financial statements, collectively known as an accounting system, the business owner can track the current status and financial health of a firm and adjust operations or money allocations as appropriate to resolve problems that may be perceived. Good financial record keeping provides the basis for making informed business decisions and helps prevent errors, omissions, fraud, abuse, and carelessness.

Statements of financial condition reflect what is known as the accounting equation, or the relationship of assets to liabilities and capital, rendered thus: Assets = Liabilities + Capital (Ragan 5). Elements of all financial statements fall within one of the three categories of the equation.

An asset is what is owned, and a liability is what is owed. The difference between assets and liabilities is the amount of capital, or equity. In bookkeepi

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e fund. Petty cash slip amounts are recorded in the Cash Disbursements Journal and should be filed separately. Ragan (14) says that a check should be made out to Petty Cash for the slip amounts when that total is nearly equal to the fixed amount; that appears to mean that a check for cash should bear the memorandum "petty cash." Ragan divides the Daily Summary of Sales and Cash Receipts into three major sections and a series of subsummaries based on categories of receipts. The three major sections are Cash Receipts, Cash on Hand, and Total Sales. Within Cash Receipts, Ragan identifies cash sales, collections on account, and miscellaneous receipts. In today's retail environment, further divisions would be credit card(s) and/or ATM sales. Electronic registers can be programmed to track each kind of cash receipt. All cash receipts are then added, to arrive at Total Receipts. Cash on Hand consists of petty cash and slips as well as the change fund. Since petty and change funds are fixed in amount, the amount of their totals subtracted from Total Receipts should be equal to the Total Cash Deposit. If the Total Receipts is more than Total Cash Deposit, then the summary is Cash Short in the amount of Receipts minus Deposit. If Total Ca

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