If you’re a small business owner and want to do the bookkeeping tasks all by yourself but don’t know how then here are book keeping basics to get you started.
Book keeping Crash Course 101:
What is bookkeeping? Bookkeeping is a method of tracking your company’s financial records and seeing where your funds are going, where your revenue is coming from, and which tax deduction you will be able to claim.
Steps in Bookkeeping:
1. Separate business budget from personal expenses.
Be sure that your fund from both categories are not intertwined to ensure that the IRS know what your business is earning. It is also essential to have separate bank accounts for your personal needs and the company’s budget.
2. Single entry vs. Double entry. Double entry is a system of accounting that tracks your money coming from and where it’s going. You will essentially record your transactions twice, somewhere called credit, and put it somewhere called a debit. Your credit and debit should equal each other; that’s how you will know that your books are equal. The single entry method records your transactions once they happen; this is advisable for sole proprietorships or businesses with no employees.
3. Cash vs. Accrual Basis. Cash basis, you only recognize revenue when you receive it, like depositing your check into your bank account. On an accrual basis, you recognize revenue when it is earned, like completing a project and writing an invoice.