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The Complete Guide to Bookkeeping for Your Business

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Opinion holder entrepreneur Contributors are their own.

Bookkeeping is the cornerstone of every small business insight. If you run a small business, you should make it a habit. Small business owners often set aside bookkeeping to tackle the most pressing issues. If not, it’s procrastination or numerophobia (fear of being misunderstood).

Trust me, don’t put it aside. Too many small business owners often pile up backlogs of transactions and expenses before they can sort them out. This can hurt your business in at least two significant ways.

First, it creates confusion. Modern Bookkeeping teaches you important things to know. Without it, you only have a rough idea of ​​how much money you have, the outstanding bills you need to pay, and whether you’ve been paid for the goods and services you provide.

Second, ignoring bookkeeping makes paying taxes more complicated. There are few things worse than a looming deadline and having to sort through paper bags full of receipts for deductible items. At the same time, we are trying to meet client deadlines. Hiring a tax accountant or tax accountant is not cheap.

I have good news. You don’t need a finance degree to understand and benefit from bookkeeping. Today’s method of accounting, double-entry bookkeeping, dates back to the 15th century. If you’ve ever created a checklist of items needed to complete a task and marked off the items as they were collected or accomplished, you know the gist of bookkeeping.

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Bookkeeping 101

If you’re ready to start bookkeeping yourself, here are the non-degree course syllabuses.

  • accountAccounts group similar business activities for easier analysis (i.e. Merchant Accounts). A complete list of accounts is called a chart of accounts. Items on this list include all business activities you do, such as sales, cost of goods sold, salaries, etc.
  • Accounting period: This is a specific period of time when you are looking at your business. For example, you may want to know the grades for February. Or the third quarter. or year. Or since you started advertising.
  • accounts payable: This is the amount currently owed to the vendor or supplier but not yet paid. If you buy a computer that you haven’t paid for yet, it’s accounts payable.
  • accounts receivable: I completed the work and submitted the invoice, but the client’s check has been mailed. That’s accounts receivable.
  • accrual: Expenses or revenues incurred but not yet paid (this means that accounts payable and accounts receivable are accruals). If you use accrual accounting, you record accruals (both positive and negative) at the time of sale. Cash-based accounting records when money is paid or received. The advantage of accrual accounting is that it lets you know that even if you have cash on hand, you shouldn’t spend it freely. You may owe a shipment of raw materials just received. Conversely, he may have worked for one client for a month and has not yet been paid for the work.
  • assets: something you own, physical or intangible. These could be items such as property, vehicles, cash, computers, or the right to use a particular parking space.
  • Balance sheet: This document summarizes all your assets (what you own) and compares them with all your equity and all your liabilities (what you owe). This allows you to assess the overall financial health of your organization.
  • cash flow: A comparison of the money you would normally receive and the money you would have to pay.
  • Cost of Goods Sold (COGS): If you make a product, the total cost is directly related to the production of that product. For a bakery, these would be ingredients like flour, sugar, eggs, and the cost of using the kitchen to bake the bread. After deducting cost of goods sold from net sales (that is, gross sales minus discounts, discounts, or returns), we get gross profit.
  • double entry bookkeeping: See where your money comes from and where it goes by recording each entry as a credit and debit. This makes it easier to find errors. Credit cash when purchasing assets. When you spend money on that asset, it is debited from your asset account (for example, “computer expenses”). Once everything is confirmed, it is called creating a trial balance. This is a way of indicating whether the debits and credits are accurate. If the debits and credits don’t match, someone should check each item until they find the cause of the error. Capturing these discrepancies, though time-consuming, is the real benefit of double-entry bookkeeping.
  • stock: the value of the business and its owners (whose shares may all be yours or shared with partners or investors) after paying off debt.
  • expense: How much you spend to keep your business running. Expenses can be items needed to manufacture the products you sell. These may include costs such as building rent, office supplies, and salaries.
  • general ledger: This traditionally lists all the individual accounts required to depict the assets, liabilities, equity, income, expenses, profit and loss transactions of a business. Summarize from a chronological list of journals, such as raw inventory journals and sales receipt journals, instead of exhaustively listing all transactions (e.g. wire purchased weekly since January) .
  • Income Statement (Income Statement): This document compares income and expenses to reveal whether a business made a profit or lost money in a given accounting period.
  • liabilities: Unpaid unpaid money, such as unpaid bills, credit card balances, and business loans. A business is in trouble when its total liabilities are greater than its assets.
  • payroll: A complete list of employees and the amount paid for each employee, as well as the amount paid for taxes and retirement benefits.

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Bookkeeping 102

The next non-MBA skill you need to master is diligent and accurate record keeping. Spoiler alert: Boxes full of disorganized receipts and related financial documents aren’t seen until minutes before tax time, so they’re neither efficient nor record-keeping.

Beware of other systems that should work but have flaws. For example, keeping a journal in a notebook or file folder, no matter how easily accessible, can be cumbersome and error prone. Likewise, spreadsheets look compact, are flexible, and most people understand the basics. Still, it’s error-prone and can quickly become complicated.

Here’s what really works in mastering bookkeeping: An online platform that allows you to quickly scan your data and systematically link it with your bank accounts and credit cards.

Such platforms are easy to set up and can automatically perform most of the most useful tasks. There are several platforms like this (like Neat and QuickBooks) that have the ability to break down your expenses and income into standard accounts so you can quickly understand the finances of your business and where opportunities for improvement lie. is useful for

Now throw your hat in the air. After just a few minutes of reading this article, you’ve mastered the essentials of bookkeeping without an accounting degree. Go ahead and make a profit.