Why accounting is taken lightly by small business owners? Some major misconceptions

Maintaining books of account is compulsory for all kinds of businesses whether it is a small business or a large business. By having a proper set of accounting records, it is possible for an organisation to achieve complete level of adherence to the accounting policies and regulations. There are significant benefits that can be achieved from having appropriate records of day to day transactions. In this relation, it is often miss confused especially by small businesses that there is no such benefits possible to them from maintaining a good set of accounting records. Some of the major misconceptions are discussed as follows:

1. It is important only for large businesses to have accounting records: This is one of the major misconceptions identified among small business owners that there is no need for having a proper record of day to day transaction. The major reason behind this misconception is that they have a belief that the number of transactions are very less which do not need a proper accountant to manage the books of accounts. But this is not correct and it is important for small businesses as well to have a proper record for day to day transactions. There are significant benefits possible to them by having a proper system in recording the day to day transactions. Some of these are highlighted as follows:

a) By having a proper system in maintaining the books of accounts, the most significant benefit is mainly in the form of good knowledge about the performance of the business. They can regularly monitor the important activities and therefore take timely decisions which could positively impact the performance of the business.

b) It is also possible that the chances of mistakes would be very lower from maintaining books of accounts on regular basis rather than leaving them to complete on the last few days of the financial year.

c) It is also possible to achieve proper compliance with respect to tax regulations by maintaining books of accounts on regular basis.

1. There is no need of accounting software to small businesses: This is another major misconception that is highly evident among small business owners. However it is not true because the advantage of accounting software is available to both small businesses as well as large businesses. Technology has provided significant opportunities to businesses in maintaining the books of accounts. The availability of Advanced Accounting software packages allows even non expertise person to properly maintain the books of accounts, as they automatically prepare the final accounts, and the accountant is required to only input the day to day transaction. The benefit is therefore available to small businesses as well from using accounting software packages in managing the books of accounts.
2. Start-up Expenses can be Offset Immediately: In starting a new business, there are many types of cost that are required to be incurred in properly setting up the business. The expenses can be of revenue as well as capital nature, and the major misconception among the small businesses is that they believe that all the cost incurred in setting up the business can be written off against the first year of business operations. However this is not true and the capital nature expenses cannot be offset immediately in the said financial year. They can be written off in small installments over a number of years, and it is therefore wrong to perceive the write-off of all expenses on immediate basis.
3. Accounting is necessary for tax compliance only: It is important for all kind of businesses to properly comply with taxation rules and regulations. The proper level of compliance is essential for their smooth functioning, but small businesses believe that maintenance of books of accounts is only required to be done for taxation purposes. This is not true because it is already evaluated that there are significant benefits possible from maintaining accounting records throughout the year. Therefore it can be concluded that compliance with taxation is not the only purpose for which accounting records are required to maintain by small business owners.

These are basic misconceptions and for detailed opinion, the accounting assignment help of Australian Assignment Help can be availed.

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