What is Bookkeeping? Business Owner’s Guide

Terms Glossary which gives you definitions of the common words used in bookkeeping from A-Z. If Bench does your bookkeeping, you can also upload and store as many digital receipts and documents as you’d like in the Bench app. Double-entry is more complex, but also more robust, and more suitable for established businesses that are past the hobby stage. You can’t run a healthy, successful business without having your books in order. It’s like driving a car without a fuel gauge or a map—sooner or later you’re going to get lost or run out of gas.

Bookkeepers are responsible for recording, classifying, and organizing every financial transaction that is made through the course of business operations. The accounting process uses the books kept by the bookkeeper to prepare the end of the year accounting statements and accounts. Whether it’s updating your books or keeping in contact with your tax adviser, maintain your business’s financial records and expenses throughout the year. That way, you can be well prepared when it’s time to file taxes with the IRS. Without any hiccups or last-minute scrambles, you’ll be able to enter tax season confidently.

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Accounting is the umbrella term for all processes related to recording a business’s financial transactions, whereas bookkeeping is an integral part of the accounting process. This is the first course in a series of four that will give you the skills needed to start your career in bookkeeping. If you have a passion for helping clients solve problems, this course is for you. In this course, you will be introduced to the role of a bookkeeper and learn what bookkeeping professionals do every day.

Assets and liabilities (like inventory, equipment and loans) are tracked separately. If you’re just starting out, are doing your books on your own and are still in the hobby stage, single-entry is probably right for you. In this module, you will learn how bookkeepers using accounting software to record transactions.

Liabilities and Equity in Accounting

Start by deciding on the system you want to use, whether it’s an online program, paid software or a spreadsheet. Next, set aside a dedicated time either weekly or biweekly to review your bookkeeping, reconcile transactions and complete necessary data entry. Finally, you’ll want to decide how all receipts and documents will be stored. You can either keep hard bookkeeping tutorial copies or opt for electronic files by scanning paperwork. When an effective bookkeeping system is in place, businesses have the knowledge and information that allows them to make the best financial decisions. Tasks, such as establishing a budget, planning for the next fiscal year and preparing for tax time, are easier when financial records are accurate.

Knowing these nine bookkeeping basics is essential for any bookkeeper to perform their job well. They apply to almost any business type and size, which makes having these basic bookkeeping skills valuable. Expenses refer to the money used to run the business but aren’t related to products or services.

Importance of a Bookkeeping System – 9 Key Reasons

Depending on the type of accounting system used by the business, each financial transaction is recorded based on supporting documentation. That documentation may be a receipt, an invoice, a purchase order, or some similar type of financial record showing that the transaction took place. If you’re ready to take bookkeeping off your plate and delegate this task to someone else, it can be hard to know where to look. Start by reaching out to other business owners for recommendations, searching online for providers and checking out reviews on Google or Yelp. If you don’t feel comfortable with a freelancer, there are many firms that offer bookkeeping services as well.

• Same goes for expenses, which you record when you’re billed in the form of accounts payable.
• The more information (and supporting documents) you can give your CPA at tax time, the more deductions you’ll be able to legitimately claim, and the bigger your tax return will be.
• Our Visual Tutorials are perfect for people who get overwhelmed studying jargon-filled accounting textbooks.
• If you’re new to business, you may be wondering about the importance of bookkeeping.
• We’ve analyzed and rated the best online bookkeeping services to help you make the best decision when choosing the right one.