The cash method of accounting is most commonly used by sole proprietorships and small businesses. In cash accounting, you usually recognize the income when it is received and the expense when the bill is paid out. However, there are some expenses that need to be treated differently.

1. Inventory

If an inventory is necessary to account for your income, you must generally use the cost of goods sold to calculate your purchase cost. 

 » Read more about: Accrual Accounting Methods for a Cash Basis Business  »

As a business with employees, you have certain important responsibilities relating to payroll taxes. Understanding of these responsibilities will help you in making certain that you comply with the law. You must calculate payroll taxes and deductions, make payments and report payroll tax to the federal and state tax agents.  Here is a summary of payroll bookkeeping and reporting responsibility for a business to pay employees.

Summary of Payroll bookkeeping and reporting

Requirement

Purpose

Action

Agency

I-9 (completed by both employee &  » Read more about: Your Payroll Responsibility as a Employer  »