Core Accounting Knowledge Every Business Owner Should Know
Even if you outsource bookkeeping, 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.
