If a business entity has not kept any formal accounting records, how will it start its formal accounting system? What are the steps?
submitted by jules

rhembles

If there are no records, the business needs to start from scratch.

First, they should find out what money they have and owe. They could look at bank accounts, bills, and receipts. Then, they can create a list of accounts, like cash, expenses, and debts, to organize things. After that, they record what they already have in those accounts as starting points. Going forward, they should keep detailed records of all transactions, maybe with a simple spreadsheet or accounting program. Asking a professional at some point can help make sure they're doing it right. You want to be able to get it right during an audit.

dyer maker

If a business hasn't kept any formal records before, it's got to start somewhere. You'd need to collect anything you have available, like bank statements, receipts, invoices, etc.

You can look at what the company owns, to figure out assets. Then look at what it owes other people, to figure out liabilities. Once it has that, you'd have enough to set up a chart of accounts and record those initial balances. After that, it can begin recording future transactions properly. Don't get behind again.

the sparrow

Get all your bank statements, invoices, and receipts. Make a chart of accounts that makes sense for whatever type of business it is. Record all opening balances for assets, liabilities, and equity based on any data you could gather. Estimate if necessary (don't quote me on that).

After you've started, you should really get an accounting software in place.