Learning about bookkeeping does not have to be a headache. In this article, we will discuss the basic things you need to know. We’ll talk about how you can fill in your records, simple bookkeeping techniques, and some crucial practices you should pay heed to. 

We should mention right here and now that you don’t need a bookkeeping qualification or an accounting degree to bookkeep. You just need to start with the basics. Let’s begin with the options you can utilize.

Bookkeeping Options

Knowing how to fill in your records is important to get started. However, you need to pick an option to perform this task. Here are the three common options:

  • Spreadsheets: They could be a decent place to get you started. They are perfect for small businesses. You will discover that sticking with them as your company expands could prove difficult since human mistakes can occur.
  • Accounting Book: Should you simply be maintaining basic accounting records, an accounting book will help. But not everyone appreciates the manual approach, particularly given the government’s Making Tax Digital (MTD) initiative.
  • Bookkeeping Software: You will have to use desktop software or a bookkeeping app in line with MTD. You can check out Alpharetta bookkeeping services to see some solutions that might fit the needs of your business. Look for a system that removes the uncertainty from bookkeeping. It should have simple-to-understand terminology and the essential elements you will need to streamline the process.

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Standard Bookkeeping Types

We have compiled the most fundamental forms of bookkeeping you should be familiar with below:

  • Cash: The account of all commercial transactions transit. Often using two journals, cash receipts and cash disbursements, this special account is used to monitor activity.
  • Inventory: The register you use to record every item you have available. Physical inventory counts can help you to verify the figures you have in your books.
  • Accounts Payable: This enables you to view, with a time record, what money is leaving or has left the company. This helps you to see all you need to pay for and guarantees that you avoid paying twice to any one person.
  • Accounts Receivable: Should your company offer goods or services and fail to get paid right away, those are receivables. This account monitors due money from clients. This must be current if you want to issue timely and accurate invoices.
  • Sales: You keep all of your incoming sales transaction income in this account. This is another crucial account, since timely and correct sales tracking enables you to understand the situation of your company. 
  • Loans Payable: For whatever you have borrowed, the account records and breaks down all you still owe. It also notes when due dates for each item arise.
  • Payroll Expenses: The account where you monitor wages and salaries paid to your staff. For many firms, this is their largest outlay of funds. Meeting tax and other reporting criteria depends on this being accurate.
  • Purchases: You keep track of any supplies or products you have purchased for your company here. Calculating the costs of goods sold requires this fundamental component, which you remove from sales to get the gross profit of your company.
  • Retained Earnings: This account records any gains your firm makes that are reinvested back into the company instead of distributed to the owners. Since these are cumulative, they are displayed as a running total of money kept since the company first opened. It’s a good approach for monitoring your company’s performance over the years.

Crucial Bookkeeping Practices

Though it can appear daunting for any novice, bookkeeping can be quite easy. By following these simple but essential bookkeeping techniques, you will find your feet with time. Let’s take a look, shall we? 

  • Avoid Delaying: Write down dates and due dates as notes so you don’t have to do the books the night before. You’ll make fewer mistakes and have more time to look for important information if you do it earlier.
  • Tidy Up Your Records: Records that are jumbled and full of random pieces of paper will make it impossible to do the books. This is because important data will be spread out all over the place. Arrange them in a way that makes it easy to find what you need quickly.
  • Keep Your Receipts: If you use software to keep your receipts, you’ll be able to have an office without paper. Everything is in one place, and if there is ever an investigation, all the information about expenses will be easily accessible. That way, you’ll always follow the rules.
  • Don’t Mix your Personal and Business Finances: If you want to do your taxes faster, you might want to keep your personal and business funds separate. That way, you won’t have to look through personal information to find business-related money matters and the other way around.

Key Bookkeeping Terms

It’s a given that you’ll come across some new words and phrases when reading balance sheets and income statements. When used, they’re pretty simple to understand once the terms are broken down into their simplest forms. We couldn’t fit them all here, but here are five of the most common terms you should know in bookkeeping:

  • Balance Sheet: A report that shows how your business is doing financially. It lists all of the business’s assets, debts, and cash. Its job is to help you see what your company owns and pays.
  • Expense: Expenses are the costs that a business has to pay every day to run its business. They can be set, variable, accumulated, or one-time.
  • Chart of Accounts: This is a full list of all the accounts your business uses to organize its money. This can include things like equity, cash, debt, assets, and more.
  • Profit and Loss: A financial report that shows how much money was made and spent over a period of time.
  • Trial Balance: A trial balance is a business record that combines all of the ledgers into columns for debits and credits. That way, a company can be sure that its accounting method is correct mathematically.

Conclusion 

Accounting is an important part of running a business because it helps you keep correct records of your money and make smart decisions. You can speed up the process and stay in compliance by learning the basics of accounting, trying out different tools, and putting good practices into action. A good understanding of bookkeeping is essential for running a successful business, whether you use tools or do it by hand.