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Basics of Bookkeeping That You Should Know About

Posted: May 24, 2021 at 4:29 pm   /   by   /   comments (0)

Bookkeeping is the process of keeping a record of all the financial transactions of your business in the form of a book or in software. This record allows you to keep track of your business’s money, revenue produced, and tax deductions that you can claim for. This means that bookkeeping is an essential requirement for your business and its success. In this article, we will tell you the process of bookkeeping and how you can begin with bookkeeping. So read on.

Understand your business accounts

A business account not only refers to a bank account but documentation of all the financial transactions is also included. These include:

  •       Assets – all the resources held under your business
  •       Revenue – income earned by your business
  •       Expenses – expenditures of your business
  •       Liabilities – payable debts and loans
  •       Equity – the owner’s stock

So bookkeeping begins by creating a business bank account according to the category so that appropriate transactions can be recorded. Also, keep your business and personal accounts separate as they can cause problems such as liability issues, tax payment issues, loss of money, and waste of time in bookkeeping.

Select a bookkeeping system

Bookkeeping systems are two; single-entry and double-entry bookkeeping.  For businesses just starting, then the single-entry method will be best for you. It is easy, simple, and requires less time as everything is recorded once as an income or an expense, while the liabilities and assets are recorded separately. You can also use excel templates to create financial statements yourself. On the other hand, double-entry is a difficult method, mostly used by professional bookkeepers. In this method, everything is entered in a journal and then entered in a ledger two times as a credit or debit. The software used today for bookkeeping also use the double-entry method.

Select an accounting system

There is a cash or accrual accounting system. In the cash method, your transactions are recorded when you receive the money. This method is best for small businesses as it is easy and saves time in tracking payable and receivable. The accrual method records revenue as receivables and expenses as payable. This method is for establishes companies who require an idea of their income and expenses in the long run.

Opt for the correct tools

If you are just starting out, then you can manage everything using a spreadsheet from Excel templates. Or you could get more robust cloud accounting tools such as QuickBooks. They are the best if you know what you are doing and have some knowledge and experience. But if you are unable to do the bookkeeping yourself, then you can hire bookkeeping services here, and they will do the bookkeeping and manage your financial transactions and taxes.

Ensure transactions are accurately arranged

Bookkeeping is to ensure that all your financial transactions are recorded in the correct order and in the right category. This saves a lot of time and keeps you safe in case you are audited. It is important to discuss your accounts and systems with a professional so that it meets the standards and rules of the CPA and industry.

Store your documents properly

Important documents such as receipts are very important as the ink on them fades over time, so they cannot be stored as they are. This is why you need to store your important financial documents regarding expenses on a safer system such as Google Drive or Dropbox, to name a few. This will help you in providing all the required documents during tax time.

In conclusion

Whether you are a small business or an established business, you need to properly keep a record of your business transactions to avoid problems in the future, keep track of your money and gain insight into the future of your business. So it is crucial that you make bookkeeping a regular practice so that your books stay up-to-date.

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