Your small business accounting should be prepared with two objectives in mind.
Accounting recordkeeping should follow the tax code in regards to what is business revenue and expense, and how expenses should be classified.
Accounting information, if structured properly, should also give a business owner insight into the health of their business. This insight starts with the creation of a well, thought out chart of accounts structure. The use of other attributes such as classes, locations, types and various other classification fields can further improve the use of your accounting data.
When designing the accounting system, keep in mind that your accounting numbers are not simply for year-end tax preparation. Your accounting numbers can be used during the year to provide you key indicators as to the health of your business, and whether key objectives and targets are being met.