Core Accounting Knowledge Every Business Owner Should Know

Even if you request a quote, understanding core accounting concepts helps you make better decisions. Lenders, investors, and tax authorities all rely on your financial statements – and so should you.

This guide breaks down the most common accounting FAQs we hear from small business owners.

Bonds Payable: Premiums, Discounts, Debit or Credit?

• Bonds Payable = a company’s long-term debt obligations.
• Premium → Bonds issued above face value (you’ll owe less in interest).
• Discount → Bonds issued below face value (you’ll pay more in interest).
• Debit or Credit? → Bonds payable is always a credit (liability) on the balance sheet.

See: Bookkeeping Services for Small Businesses.

Goodwill on the Balance Sheet

• Goodwill = the extra value paid when acquiring another business (brand reputation, customer list, etc.).
• Recorded only when a purchase happens – not for organic growth.
• Treated as an intangible asset.

See: Outsourced Bookkeeping.

1099-NEC vs. 1099-MISC

• 1099-NEC → for independent contractors (non-employee compensation).
• 1099-MISC → for rent, royalties, and other miscellaneous payments.
• Key for compliance: businesses must file these with the IRS to avoid penalties.

See: Catch-Up Bookkeeping Services.

Cash Flow Statements: Why They Matter

• Show where money is coming in and going out.
• Three sections: Operating, Investing, Financing.
• More important than “profit” – you can be profitable on paper but still run out of cash.

See: Monthly Bookkeeping.

The Accounting Equation: 3 Core Formulas

• Assets = Liabilities + Equity
• Equity = Assets – Liabilities
• Liabilities = Assets – Equity

These are the foundation of every balance sheet.

Which Accounts Do Not Appear on the Balance Sheet?

• Income and expense accounts only appear on the Profit & Loss (P&L), not the balance sheet.
• The balance sheet only shows assets, liabilities, and equity at a given point in time.

Major Duties of a Bookkeeper

• Categorize and record all transactions
• Reconcile bank & credit card accounts
• Track accounts receivable/payable
• Prepare monthly reports
• Organize tax-ready books

See: CPA vs. Bookkeeper.

FAQs

Can a bookkeeper prepare financial statements?
Yes. Bookkeepers prepare management-level financials; CPAs prepare audited/reviewed statements.

Why do business owners need to know this?
Because lenders, investors, and the IRS all rely on these reports – and you should too.

What’s the easiest way to stay compliant?
Outsource bookkeeping so your books are CPA-reviewed monthly.

Final Takeaway

Understanding accounting basics – from bonds payable to goodwill – helps you read your financials, talk to investors, and avoid mistakes.

With RemoteBooksOnline, you don’t have to manage every detail yourself. Our flat-rate, CPA-reviewed bookkeeping keeps your books accurate while you focus on growth.

Start with your first month free.