New ask Hacker News story: Ask HN: What Do I Need to Know About Accounting for a Small Business?

Ask HN: What Do I Need to Know About Accounting for a Small Business?
4 by ghoward | 2 comments on Hacker News.
I am about to start a small software business, so when I read [1], which says, > Usually small businesses are terrible at accounting and finance, but even they typically have some idea where their bank accounts are and what is in them I want to know how to not be terrible at accounting and finance. This was on an article about FTX's "creative" accounting practices. Obviously, I have no intention of being creative with the accounting for my future business, so I need to know about accounting. But what do I actually need to know? Here's what I know this far, thanks to learning about GnuCash and scattering to use it for my family's finances and budget: * The static accounting equation. [Assets - Liabilities = Equity] * The dynamic accounting equation. [Assets - Liabilities = Equity + (Income - Expenses)] * The account types. (The ones in the dynamic account equation.) * What each account type is used for. * Credits vs. Debits. (And I use those terms in GnuCash as well.) * Which account types are decreased or increased with credits and debits. (Well, I use the chart in [2] as a shortcut.) * The fact that every transaction must have at least one debit and one credit. (That's called "double-entry," correct?) * The fact that the sum of all credit minus the sum of all debits in one transaction must equal 0. * The fact that income accounts are for recording the gain of money from outside. (Bad definition, but that's what makes sense to me.) * The fact that expense accounts are for the recording the loss of money to the outside. (Again, bad definition.) * That liabilities are unfunded obligations. * That assets are either money, physical goods, or the promise of payment from someone else, etc. * That equity is basically the catch-all of everything else I own. (I used it for the opening balances when I started. And yes, that's the worst definition of all.) * That the movement of money should be tracked in detail. For example, if I pay for something with a credit card, I shouldn't just record the money leaving my bank account; I should have an account for the credit card and record it there, and only when I pay the credit card bill should I record money leaving my bank account. What else do I need to know? What else would be good to know? Currently, I'm putting these principles in practice with my family finances, including budgeting, but what other skills should I learn? Note that I'm not asking about taxes or other country- or location-specific things. This is only about universal accounting, at a level needed for a typical non-fintech small business. [1]: https://ift.tt/50Tb37L [2]: https://ift.tt/3Nqet1p