Accounting 101

Accounting is not for everyone; many start-ups find it overwhelming. Nevertheless, it is not impossible. In this blog, we provide a brief introduction to the basic concepts of accounting to help you along.  

Do you prefer arts or mathematics? Some say you cannot be both. Most people are either the one or the other. What happens when you have no choice but to deal with maths? Because, as we have already seen in the past, as an entrepreneur you have no choice but to learn accounting. What can you do?

We can reassure you: It is surprisingly easy to learn the basics of accounting. In our blog you will find articles that teach everything you need to know. Today, we start with an introduction to the most important accounting terms. If you know these, you can easily take care of your accounting with Atlanto’s accounting software. Even those of you lacking mathematical aptitude.

Accounting Terminology

• Financial Accounting

Financial accounting is used to record the company’s financial position, determine its earnings, and plan its liquidity.

Financial accounting is a kind of accounting that deals with the company’s financial transactions. More precisely, it records the company’s income, expenses, debts, and changes in assets. These are documented, monitored, and analysed in accordance with the applicable accounting regulations. Profit and loss accounts and financial forecasts are prepared.

Internally, financial accounting is used to monitor the company’s financial position and make decisions. Externally, it is used to prepare financial reports for the tax authorities.

Financial accounting is divided into accounts receivable and accounts payable.

• Accounts Receivable

A sub-area of financial accounting that deals with business transactions relating to debtors. For companies, debtors would usually be customers who have to settle receivables for goods or services. A receivable is the amount that a customer owes the company.

In other words, accounts receivable accounting deals with invoices and incoming payments from customers. This includes the posting of trade receivables as well as dunning and due date monitoring of invoices.

In addition, there is also accounts payable accounting.  

• Accounts Payable

A sub-area of financial accounting that deals with business transactions relating to creditors. Creditors are suppliers or service providers who provide a product or service for the company and issue an invoice in return. Such an open invoice is called a liability.

Accounts payable accounting therefore deals with invoices from suppliers. It ensures that the company’s liabilities are paid on time and that no reminder fees are due. They should also be recorded and processed properly and on time. Invoices are checked, paid, and archived when they are received.

This supplements accounts receivable accounting and thus forms financial accounting.

• Payroll Accounting

A branch of accounting which, as the name suggests, deals with the recording, accounting, and posting of wages. This includes tasks such as managing payroll accounts, maintaining personnel data, calculating salaries and other allowances (e.g. for children), as well as the associated taxes and insurance contributions. Important documents, such as pay slips, are also created under payroll.

The term is also used for the area, or department, in the company that takes care of payroll tasks.

• Single-Entry Accounting

A simplified version of accounting. An account is kept for each individual business transaction, in which income and expenditure are recorded once in chronological order. At the end of the financial year, the opening and closing assets are then compared to determine the business success.

However, this type of accounting provides little information on the exact course of business. It is therefore only suitable for freelancers and sole proprietorships with an annual turnover of less than 500,000 Swiss francs. Larger companies are obliged to keep double-entry accounts.

• Double-Entry Accounting

Double-entry accounting is so called because all income and expenses are recorded twice: once in the debit account and once in the credit account.

Thus, you can always recognise the account in which a particular transaction took place and the purpose for which it took place (material, travel, purchase of goods). You can also see where your money comes from, whether from equity or borrowed capital, where you have invested it and whether you have made a profit or a loss, as well as which parts of your company have contributed most to this profit and where the company can improve. 

Double-entry accounting is therefore for everyone. Some are also legally obliged to do so. In Switzerland, limited liability companies, public limited companies and, sole proprietorships and partnerships with an annual turnover of at least CHF 500,000 are obliged to keep double-entry accounts. 

Do You Know Our Accounting Software?

As a digital platform for small and medium-sized enterprises and start-ups, we take on a large part of what is not part of the immediate core business. With the “Sales and Accounting” module, you can perform double-entry accounting, create QR invoices and record your services and products. All processes are automatic. Payroll is included.

You can also connect your e-banking to Atlanto and make your administrative tasks even easier. With the Atlanto app, you can scan receipts and upload them directly to your accounting system so that no more receipts are lost. With Atlanto you have undoubtedly found the best solution for your accounting.