There are types of accounting methods in common use. The Accrual Method is used by many small and large businesses and is the most common accounting method. The Accrual Method makes an effort to match the expenses with the revenue. A Cost-of-Goods Sold is calculated from all of the direct costs. Inventory is counted at regular intervals to maintain check the allocations. Service oriented businesses can use the accrual method even when no significant inventory is required.
The other common method is called a Cash-Basis Accounting. Cash-basis is similar to keeping a checkbook with income and expenses registered when they occur. Many service industries, farmers, ranchers and small business owners elect to keep their books on a Cash-basis. Typically Cash-basis businesses do not carry a significant amount of inventory on hand. Retail stores and wholesale distributors would not find the Cash-basis an acceptable method of accounting. The Cash-basis works well for many agriculture producers unless crops are stored and carried over to the next year. This may require an adjustment to make the revenue and expenses align at year end.
To start your business you will need a business plan and a set of financial projections to accompany the written plan. Excel (2011) worksheets are provided to assist you with either method. There is a video that takes you step-by-step through the spreadsheet. A PDF file can be viewed or downloaded that gives you a printout of each slide.