Setting up an Accounting System for a Medium Sized Company or Agency / Firm

Regardless whether your company / firm offers customers a product or a service, you need to keep tracking your profit / loss.
Don't be too overwhelmed with the details, it starts with category recognition. Simply, accounting made simple.

Here is a simple guideline on How to Set up an Accounting and Bookkeeping System for a Medium Size Company or Firm/ Agency:

1. In general, a medium size company needs at least 3 accounting /bookkeeping systems: Income Statement showing Profit / Loss, Cash Flow Statement showing Liquidity, and Balance Sheet showing your Assets and Liabilities


2. For your Assets and Liabilities accounts you need to keep separate ledger/ account for each categories. Example of Assets are: Cash, Inventory that needs to be sold if you are a trading company or a manufacturer or even running a bakery, the building or warehouse that you own, machinery for production, equipments to perform your service, etc. Example of Liabilities are:  Prepaid Subscription that your agency has received from your customers,  Prepaid membership your firm receive for service that has not been rendered / performed, etc.
You increase and decrease the Assets and Liabilities category accordingly matching with the account on the Revenue / Expense category.
This Balance Sheet statement can be derived at any point in time and shows the balance of your company Owners Equity in a snapshot form anytime.

3. Credit and Debit your Revenue and Expense based on accrual or cash basis. For Tax purpose, many companies use Cash basis but for Financial Accounting purpose, many use Accrual basis to reflect the real revenue earned when product is sold or when service is rendered. For services, a revenue earned through the action of rendering a service and for a paid-subscription (that is a liabilities), a revenue is increased through time lapse as time is the defining factor of how a service or membership is delivered to your customers.
This Income Statement will cover a period of time, given X as a starting point to Y as an ending point. It will show you the fruit of your company / firm's fruit which is your Profit.
Usually, Income Statement covers a fiscal year although some companies such as retail choose untraditional period such as: close fiscal years in March 31st instead of Dec 31st.

4. Last but not least is Cash Flow Statement that is useful in showing where the liquidity of your company / firm goes. Cash Flow activities is categorized based on 3 type of activities: operation activity, investment activity and financing activity. So any activity that affect the in and out of cash due to any of the 3 activities above needs to be recorded and thus at the end Cash Flow Statement will show what is the balance of the cash at an ending of period of time.
 I suggest direct method as a simple method for a Medium size company or firm, so you only need to start with beginning balance of cash, minus / plus any activities related to cash (based on the 3 different categories above) and then minus the ending balance of cash to derive the Net Increase / Decrease of Cash during the year.