Lesson 8 of 10 12 min

Basic Accounting for Founders

Tracking money in and out, and keeping business money separate.

Written by Mateo LermaLast reviewed September 20264 sources Editorial standards

All lessons in Entrepreneurship

Step 1: The lesson

How should a new business track its money?

Accounting is how you know whether your business is working. Without it, you're guessing.

Track every dollar in and out, with the date and what it was for.
Keep receipts — photos in a folder work.
Separate business money from personal money, even if it's just a separate account or envelope.
Review monthly: revenue, costs, profit, and cash on hand.

A simple ledger — a spreadsheet with date, description, money in, and money out — is enough for most student businesses.

Taxes on business income

Business income can be taxable, even for students. Under IRS rules, if your net earnings from self-employment are $400 or more in a year, you generally need to file a tax return and pay self-employment tax (Social Security and Medicare). Some states also require collecting sales tax on certain goods or services. Ask a parent, guardian, or tax professional.

Under 18?

Many payment apps, business bank accounts, and contracts require you to be 18 or to have a parent or guardian involved. Plan for that from the start.

Step 2: See it

Marcus's ledger summary for October

Hypothetical example

Revenue: 62 cleans at $12: $744
Cleaning supplies and laces: −$310
Weekend market booth: −$150
Social media ads: −$40
Profit for October: $244

Step 3: Real-world example

Why Marcus's bank balance didn't match

At the end of October, Marcus's ledger showed $244 in profit — but his business account had only $150 more than at the start of the month. What happened?

Six Clean Club members prepaid in September, so that cash had arrived the month before.
He bought extra cleaning supplies in bulk for November.
He'd paid himself $40 from the business account for a personal expense — which is exactly why separate accounts and clear records matter.

Profit and cash tell different stories. The ledger is what lets him understand both.

Step 4: Knowledge check

Quiz: Basic Accounting for Founders (3 questions)

Answer each question, then check your answer to see the explanation. Retake it as many times as you like.

Question 1 of 3

Step 5: Summary

Summary: Basic Accounting for Founders

Track every dollar in and out, keep receipts, separate business and personal money, and review monthly. A simple ledger works. Business income can be taxable — net self-employment earnings of $400 or more generally require filing — and minors may need an adult for accounts and apps.

Step 6: What you should remember

Key takeaways: Basic Accounting for Founders

Track every dollar with a simple ledger.
Keep receipts.
Separate business and personal money.
Profit ≠ cash.
$400+ in net self-employment earnings generally means filing a tax return.

Key terms in this lesson

Ledger

Finished the lesson?

Mark it complete to track your progress.

Sources and further reading

Rules, rates, and official figures in this lesson are based on these sources. People and numbers in examples are hypothetical.

1.
Self-employed individuals tax center (opens in a new tab)
Internal Revenue Service · irs.gov
2.
Topic no. 554, Self-employment tax (opens in a new tab)
Internal Revenue Service · irs.gov
3.
Recordkeeping (opens in a new tab)
Internal Revenue Service · irs.gov
4.
Manage your business (opens in a new tab)
U.S. Small Business Administration · sba.gov

Last checked September 2026: The $400 self-employment filing threshold. Rules and numbers like these can change — check the official source before making a decision.

Cite this lesson

Financial Literacy Club. (2026, September). Basic accounting for founders. https://learnwithflc.org/courses/entrepreneurship/basic-accounting

Spot an error or an out-of-date number? Tell us and we'll fix it. Read our editorial standards.

Key terms in this lesson

Ledger