Small Business Accounting 101: Basics, Set Up, Software

basics of bookkeeping

By the end of this section, you’ll learn how to smoothly manage the business side of things without spending a fortune. Did you know that you can deduct tax from the software you bought for your business? Without recording these transactions in your books, you’d forget to reclaim that hard-earned money. When you use our online bookkeeping service at ProfitBooks, you will spend less time analyzing your financial reports and more time making decisions that affect the growth of your company. Creating audit trails in accounting can help your business prevent fraud, improve accuracy, and find missing transactions.

basics of bookkeeping

He asks his banker to recommend a professional accountant who is also skilled in explaining accounting to someone without an accounting background. Joe wants to understand the financial statements and wants to keep on top of his new business.

Why bookkeeping for small businesses is important

You can submit the GST/HST you collect in installments. If you want, you can collect GST/HST even if you don’t earn this much in revenue, and put it toward input tax credits. If I were king, the Secretary of State would give a copy of this book to every existing nonprofit and especially to every new nonprofit that registers with the state. This is a great guide for board training, even if you have no interest in doing the nuts and bolts bookkeeping. To really get your board to understand your nonprofit’s financial position, they have to have some idea of what those numbers on their reports supposedly represent. This book would be an outstanding way to teach that without tears.

Here’s a look specifically at ecommerce bookkeeping from a daily, monthly, quarterly, and yearly perspective. With good bookkeeping services or software, you can streamline data entry, create detailed financial reports, consolidate data, and automate record keeping. It’s also an easy way to improve accuracy across your business and eliminate time spent doing repetitive tasks. Bookkeeping is the process of recording and managing all financial transactions for your business, including sales, purchases, and payments. Bookkeepers track all costs and income, to help a company make informed financial decisions.

Why bookkeeping matters

Bookkeeping Basics is a great reference book for non-profit board members when they want a quick understanding of board treasurer duties and responsibilities. I plan to share this easy-to-understand handbook with our Board Treasurer-elect. It seems geared towards slightly larger non-profits but can still be helpful for even smaller organizations that have the potential to grow. I was surprised this book is really easy to follow and I enjoyed the helpful charts. This book explains, step-by-step, what to do and WHY. I now feel I have a better idea of what tools to implement to have legal, accessible books. This is a great book for a beginning bookkeeper at a small nonprofit.

Can you teach yourself bookkeeping?

You can learn bookkeeping at no cost on our website We recently expanded our Explanation of Bookkeeping, and we have many other topics that are relevant including debits and credits, adjusting entries, financial statements, bank reconciliation, etc.

Assets.Resources or things of value owned by a company as the result of its financial transactions (e.g., inventory, accounts receivable). Whether you’re starting out as a new business owner or have been running an online store for years, learning how to track your expenses and revenue can feel like a huge challenge.

Periodically reevaluate your methods

Individual line items are then broken down into subcategories called accounts. In our ice cream shop example, some accounts in your ledger might be “revenue-ice cream sales”, “expenses-ice cream ingredients”, etc. In order to run a small to medium-sized business, you must learn bookkeeping bookkeeping 101 basics to create a system suitable for your needs. Do not panic, though, as you do not need to take a crash course in accounting and finance to master this technique. From balance sheets to income statements, there’s no denying that there are new terms and phrases you’ll come across.

Xero is a cloud-based accounting system designed for small and growing businesses. You can connect with a trusted adviser and gain visibility into your financial health. Plus, with Xero’s advanced accounting features, you can view cash flows, transactions, and other financial information from anywhere. The bookkeeper manages the day-to-day records, regularly reconciling accounts, categorizing expenses, and managing accounts receivable/accounts payable. A business bank account helps protects your personal assets in the unfortunate case of bankruptcy, lawsuits, or audits. And if you want funding down the line, from creditors or investors, strong business financial records can increase the likelihood of approvals.

How Does Bookkeeping Differ From Accounting?

It can be tempting to push your books aside to focus on running your business. But if you want to keep your business on track for success and keep your financial ducks in a row, prioritize your books. As a busy business owner, it can be easy to lose track of time and miss deadlines. As soon as you know it, another month or year has gone by. It’s no secret that automation can be a lifesaver for small business owners. The more you automate, the more time you will have for your business. Having bookkeeping is like being able to understand how much gas you’ve got in the tank.

What are the 2 types of bookkeeping?

The single-entry and double-entry bookkeeping systems are the two methods commonly used. While each has its own advantage and disadvantage, the business has to choose the one which is most suitable for their business.

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. Every transaction you make needs to be categorized when it’s entered in your books. This helps your bookkeeper catch more deductions, and will make your life easier if you get audited. When you’re stuck in the minutiae of reconciling your transactions, this won’t feel like “seven easy steps”.

To streamline your accounting responsibilities, consider automating your accounting process with accounting software. With software, you can say goodbye to spreadsheets and manually crunching numbers. If you are operating a small business by yourself from home or even a larger consulting practice, you might want to stick with cash accounting.

basics of bookkeeping

I would recommend this book for any person in a non-profit who touches the bookkeeping function. It would also be a good supplement book to add as accounting or bookkeeping curriculum. This book is a great introduction to basic bookkeeping.

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In the accounting world, it’s more complicated than that. So for this tutorial, to keep things simple, we’re going to talk about increases and decreases rather than credits and debits.

  • The reason it’s so important to keep these records is simple.
  • Basic Bookkeeping Level 2 course provides students with a greater understanding of accounting and the procedures used to produce financial reports.
  • Once you approve of the categories, transactions automatically settle in your financial statements.
  • During the course, students examine the Income Statement, the Statement of Owner’s Equity and the Balance Sheet, and then practice completing these financial statements.
  • No matter whatever method you choose to read the book, this book is an invaluable resource for building a bookkeeping business.