Small Business Bookkeeping

• May 12, 2022
• |
• BestBizFinder

What is bookkeeping?

Bookkeeping refers to the basic tasks that you need to perform to record and organize the financial transactions of your company. The most obvious reason why you need to do bookkeeping if you have a business is to check whether you are making a profit or not. The ability to draw accurate reports also helps you gain a clearer understanding of the strengths and weaknesses of your business.

Although people often use the terms “accounting” and “bookkeeping” interchangeably, they are not the same. Bookkeeping involves collecting data, entering it into a system, and then drawing up basic reports. Bookkeeping tasks provide the basis for accounting processes, which are more analytical and participatory.

Basic bookkeeping tasks include:

·       billing clients

·       Supplier invoice registration

·       Sellers Payment Recording

·       Recording customer payments

·       Update your payroll system

·       Financial reporting fee

Bookkeeping Basics

Here is a list of important accounts, terms, and financial statements for a bookkeeping system that all small business owners should familiarize themselves with:

1. Debts and Credits

Generally, when a transaction involves money entering the company, it is a discount. On the contrary, when money leaves the business, the system will credit the cash account. Simply put, debits are positive numbers, while debits are negative numbers.

2. Shareholders' rights

Shareholders' equity is an account on a company's balance sheet that includes equity capital and retained earnings.

3. Opponents

Liabilities are the amounts a company owes to its creditors and also form part of the company's balance sheet. Liabilities also include money received by the company for future services because the amounts received have not yet been earned.

4. Assets

The balance sheet also includes the company's assets, which are the valuable resources that the company owns. Assets can include inventory, buildings, equipment, accounts receivable, and inventory.

5. Accounts Receivable

Accounts receivable is the account that records all outstanding customer payments. If you provide services or offer products without collecting payments right away, you will need to keep track of the money that customers owe you. Accounts receivable helps you send accurate invoices to your customers, as long as you enter all relevant data and keep the system up to date.

6. Accounts Payable

As the term indicates, accounts payable helps you keep track of the accounts your business needs to pay. Using accounts payable to monitor your payments will ensure that your accounts are reconciled in a timely manner and avoid errors, such as paying the account twice. Keeping a clean record of payments is important if you want to build strong relationships with your suppliers and develop a good reputation for your business.

7. Inventory

Your inventory is one of the most important aspects of your business, as it is essentially how you make a profit. You must ensure that the numbers reflected in the inventory section of the balance sheet accurately reflect the actual inventory you keep by taking inventory regularly and adjusting the numbers accordingly. It is also important that the system has the correct information regarding inventory cost and selling prices.

8. Owner's property rights

This calculation reflects how much money the owner has in the business when all liabilities are subtracted.

9. Retained earnings

This account keeps a record of all profits that the owner reinvested in the business. This is a cumulative account, which means that it reflects all of the company's retained earnings since its inception, which is important information for potential investors.

10. Sales

To run a successful business, you need to keep track of what you sell, as this directly affects how profitable the company will be. It is important that all sales are entered into the system so that you have a clear view of the profits you are making and that the products also go out of stock.

11. Salary expenses

This account records the salaries and wages you pay to your employees plus related payroll tax costs, such as your matching Medicare and Social Security contributions. It is essential to keep this account accurate and up to date for tax and government reporting purposes.

12. Balance Sheet

If you want an overview of your company's financial position, consult the balance sheet. This is a financial statement that shows the company's assets, liabilities, and shareholders' equity and provides details regarding the balance of income and expenses during a particular period.

13. Income statement

This is another important financial statement that will give you a clear indication of the financial position of your company. An income statement is also referred to as a profit and loss statement, because it focuses on a company's revenue and expenses over a particular period.

14. Cash Flow Statement

 The cash flow statement is also a very important financial statement, because it reflects the company's operating, investment and financing cash flow, which reflects the company's liquidity and overall financial performance.