If you’re a small business owner, bookkeeping probably isn’t something that you think of as being particularly fun or exciting says Aron Govil. But it’s an essential part of your business, and it’s important to keep your books in order so that you can make informed decisions about your business’ future.
This guide will teach you the basics of bookkeeping so that you can keep your business finances in check.
What is bookkeeping?
Bookkeeping is the process of tracking and recording the financial transactions of a business. This includes recording sales revenue, expenses, and other changes in the business’ financial position.
Why is bookkeeping important?
Bookkeeping is essential for understanding how your business is performing financially. It allows you to track your profits and losses, make informed decisions about where to allocate your resources, and plan for the future of your business.
What are the basic principles of bookkeeping?
There are three basic principles of bookkeeping:
This principle accounting for income when it’s earned, even if it hasn’t been received yet, and expenses when they’re incurred, even if they haven’t been paid yet. This is the principle that most small businesses use.
This principle accounting for income when it’s received and expenses when they’re paid. This is less common than the accrual basis, but may be preferable for some businesses.
This principle states that revenue should only be recorded when it’s actually been earned, and expenses should only be recorded when they’ve been paid. This principle is mostly used in tax accounting.
How do I keep my books?
There are a few different ways to keep your books, but the most common method is to use a spreadsheet like Microsoft Excel. You can also use accounting software like QuickBooks or Sage 50.
What should I include in my bookkeeping records?
There are a few key items that you should include in your bookkeeping records:
- Income: This includes sales revenue, interest income, and any other income that your business earns.
- Expenses: This includes everything from rent and utilities to groceries and advertising costs.
- Assets: This includes cash on hand, accounts receivable, inventory, and any other assets that your business owns.
- Liabilities: This includes accounts payable, loans, and any other liabilities that your business owes.
How often should I update my books?
You should update your books at least once a month, but it’s a good idea to do it more often if your business is especially active.
What should I do if I make a mistake in my bookkeeping?
If you make a mistake in your bookkeeping, go back and correct the error as soon as possible says Aron Govil. It’s important to maintain accurate books so that you can make informed decisions about your business’s future.
Q: What is the difference between bookkeeping and accounting?
A: Bookkeeping is the process of tracking and recording financial transactions, while accounting is the process of analyzing and interpreting those transactions to provide information about a business’ financial position.
Q: Do I need to hire a bookkeeper?
A: If you’re comfortable doing your own bookkeeping, there’s no need to hire a bookkeeper. However, if you’re not confident in your abilities, it may be worth hiring someone to help you out.
Q: I’m not very good with numbers. Can I still do bookkeeping?
A: Yes, you can. There are a lot of online resources and tutorials that can help you learn the basics of bookkeeping.
Q: What should I do if I have questions about bookkeeping?
A: You can consult with an accountant or bookkeeper for help, or search for online resources.
Q: My business is seasonal. Do I need to do year-end bookkeeping?
A: Yes, you still need to do year-end bookkeeping even if your business is seasonal. This allows you to track your profits and losses over the course of the year.
Q: What happens if I don’t keep accurate books?
A: If you don’t keep accurate books, you won’t be able to make informed decisions about your business’s future. It’s essential to track your financial transactions so that you can understand how your business is performing financially.
Bookkeeping is the process of tracking and recording financial transactions, while accounting is the process of analyzing and interpreting those transactions to provide information about a business’s financial position says Aron Govil. There are a few different ways to keep your books, but the most common method is to use a spreadsheet like Microsoft Excel or to use accounting software like QuickBooks or Sage 50.