Unit Financial & Bookkeeping Guide

By October 23, 2020 May 19th, 2023 No Comments

bookkeeping guide

If you’re a small-business owner, you’re probably used to doing everything yourself. You’ve used your entrepreneurial prowess to produce a product or service that your customers need. And avoiding spending any money when you think you can just take care of a task yourself is tempting. Diamonds may be forever, but the ink on your expense receipts is not. Since the IRS accepts digital records, it’s smart to use a cloud-based system like Dropbox, Evernote, or Google Drive so you never have to deal with smudged receipts.

Whether you manage it by yourself, hire someone in-house, or outsource it to a company, having a sound bookkeeping process in place is critical to the management of your business. Bookkeeping software and systems should be able to identify potential tax deductions and make any procedure related to reporting and filing taxes as seamless as possible. Managing income and expenses closely and in a structured format will make it much easier to prepare taxes—whether independently or with a tax preparer. Some businesses use employment agencies, talent marketplaces, or other platforms to hire, train, manage, and even pay employees and contractors.

Can I do my own bookkeeping for my business?

Being a bookkeeper requires having the skills and ability to put together an accurate financial picture of any business. But it doesn’t stop there – you’ll need math proficiency, technical know-how, and could benefit from understanding the ins-and-outs of how finances work. With these qualities in tow, you can be ready to take on this rewarding career. Bookkeepers play a huge role in helping businesses stay financially secure, but it can be difficult to differentiate between bookkeeping and accounting. Bookkeepers work to ensure that records are accurate, complete and compliant with all laws and regulations.

  • Written in short chapters, this book will teach you the double-entry bookkeeping system like no other in the market.
  • You can read a chapter, implement the ideas, and then read another chapter and do the same.
  • Stay updated on the latest products and services anytime anywhere.
  • The key feature of double-entry is that the two columns must balance.
  • Recording a financial transaction in your general ledger is referred to as making a journal entry.
  • If you bill a customer today, those dollars don’t enter your ledger until the money hits your bank account.

Small business owners have many responsibilities to juggle in their day-to-day lives. However, some of the most important include bookkeeping and accounting. The financial health of your organization is essential to longevity, and without well-kept books and accurate tax returns, this stature is nearly impossible to upkeep. Using an accounting software program is one of the easiest ways to start double-entry bookkeeping. After the initial setup of a double-entry system, most software providers charge a monthly subscription fee. This equation sums up a business’s balance sheet, one of three essential financial statements along with the income statement and cash-flow statement.

How to use QuickBooks for Small Business

Calculating Stripe fees for customer payments is easy with our calculator. Enter the payment amount to calculate Stripe’s transaction fees and what you should charge to receive the full amount. Kelly is an SMB Editor specializing in starting and marketing new ventures. Before joining the team, she was a Content Producer at Fit Small Business where she served as an editor and strategist covering small business marketing content. She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. The final statement that you need to know about is the statement of equity.

What are the top 3 bookkeeping mistakes?

  • Outsourcing Your Bookkeeping.
  • Not Chasing Late Payments.
  • Failing to Keep Relevant Receipts.
  • Carelessness When Bookkeeping.
  • Combining Business And Personal Expenses.
  • Using Manual Accounting Systems.

Good bookkeeping is foundational to running a profitable business. After all, if you don’t know how much you’re making or where that money is going, you’ll have a hard time finding ways to expand your profitability. Having a good piece of software doesn’t make you knowledgeable about the US tax code, regulations, or requirements.

Bookkeeping Basics for Small Business Owners

How you go about doing your books is up to you, but even if you don’t use a 3rd party bookkeeping service you must keep solid records of business transactions. One of the first decisions you have to make when setting up your bookkeeping system is whether or not to use a cash or accrual accounting system. If you are operating a small, one-person business from home or even a larger consulting practice from a one-person office, you might want to stick with cash accounting. At the end of the appropriate time period, the accountant takes over and analyzes, reviews, interprets and reports financial information for the business firm. The accountant also prepares year-end financial statements and the proper accounts for the firm. The year-end reports prepared by the accountant have to adhere to the standards established by the Financial Accounting Standards Board (FASB).

bookkeeping guide

Equity accounts represent the current worth of a company after its liabilities have been deducted from its total assets. It includes items such as stockholder equity, retained bookkeeping 101 earnings, accumulated depreciation and dividends payable. It enables you to track which accounts increase and which accounts decrease for a given transaction.

Managing transactions

Increases and decreases are recorded in the debit and credit column of a journal. A standard in the industry, Double entry bookkeeping requires that each financial transaction be entered twice. Single entry bookkeeping requires that you make a single entry for each financial activity or transaction. Deferred revenue, also known as unearned revenue, refers to advance payments a company receives for products or services that are to be delivered or performed in the future. The company that receives the prepayment records the amount as deferred revenue, a liability, on its balance sheet. Most accounting software will automatically import your bank data so you don’t have to manually enter and organize each transaction.

bookkeeping guide

The bookkeeping transactions can be recorded by hand in a journal or using a spreadsheet program like Microsoft Excel. Most businesses now use specialized bookkeeping computer programs to keep books that show their financial transactions. Bookkeepers can use either single-entry or double-entry bookkeeping to record financial transactions. Bookkeepers have to understand the firm’s chart of accounts and how to use debits and credits to balance the books. Since the information gathered in bookkeeping is used by accountants and business owners, it is the basis of all the financial statements generated. Most accounting software allows you to automatically run common financial statements such as an income and expense statement, balance sheet and cash flow statement.

Akinwumi Michael

Author Akinwumi Michael

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