Bookkeeping 101: Bookkeeping Basics for Small Businesses

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what to know about bookkeeping

Bookkeeping is a crucial function of accounting, and earning a bookkeeping certification is a great way to show employers your expertise. While a certificate is not a requirement to become a bookkeeper, some professionals pursue certification to show their skills to employers and stand out in their job search. A proper financial data management system can provide valuable, actionable insights and prevent problems, such as skimming fraud.

  • By having access to this data, businesses of all sizes and ages can make strategic plans and develop realistic objectives.
  • A bookkeeper is responsible for identifying the accounts in which transactions should be recorded.
  • At the end of the period, you’ll “post” these entries to the accounts themselves in the general ledger and adjust the account balances accordingly.
  • A bookkeeper checks for errors when creating reports and managing the general ledger.
  • Some businesses start off by using the cash basis and as they grow, they shift to the accrual basis of accounting.
  • Benefits of this option include potentially fewer hours, choosing how many clients you work with, and the freedom to partner with bookkeeping companies to free up even more time.
  • Now that you’ve mastered the basics of bookkeeping, let’s move on to the best practices.

Recording a financial transaction in your general ledger is referred to as making a journal entry. If you choose to use double-entry bookkeeping—and bookkeeping 101 we strongly suggest you do! We’ll show you examples of how to record a transaction as both a credit and debit later on.

Cash-Based Accounting

Take routine bookkeeping off your never-ending to-do list with the help of a certified professional. A QuickBooks Live bookkeeper can help ensure that your business’s books close every month, and you’re primed for tax season. Our expert CPAs and QuickBooks ProAdvisors average 15 years of experience working with small businesses across various industries. When you think of bookkeeping, you may think it’s all just numbers and spreadsheets.

what to know about bookkeeping

You’ll use those reports to communicate the cash flows, financial position, and performance of your business. It doesn’t matter if you love crunching numbers or consider yourself the more creative type. Entrepreneurs have to be aware of the financial health of their businesses and good grasp of accounting basics.

Understand the Income Statements and Balance Sheets

Assets also include fixed assets which are generally the plant, equipment, and land. If you look you look at the format of a balance sheet, you will see the asset accounts listed in the order of their liquidity. Asset accounts start with the cash account since cash is perfectly liquid. After the cash account, there is the inventory, receivables, and fixed assets accounts. Firms also have intangible assets such as customer goodwill that may be listed on the balance sheet.

what to know about bookkeeping

We’ll walk you through what you need to know about bookkeeping basics. Purchases are the exchange of money for inventory or goods during an accounting period. Present value is a concept that factors future revenues, expenses, and debts for inflation to provide an accurate value of future funds with present-day dollars. For example, business expenses include rent, equipment, and payroll. For example, if a company has $250,000 in total assets and $100,000 in total liabilities, it has $150,000 in equity.

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