This might be credit the company has issued or outstanding invoices to be paid by clients.Īssets – All the things a company owns which are required to do business. This is usually done monthly, quarterly and annually.Īccounts payable (payable _by _the business) – The account where all of a company’s outstanding bills are tracked.Īccounts receivable (payable to the business) – The account which tracks payments to be collected by the company. Here’s a glossary of common terms used in bookkeeping:Īccounting period – A period of time over which financial information is tracked. In short, bookkeeping is making sure that you record all of your financial transactions so that you pay the correct amount of tax at the end of the year. We recommend you get acquainted with the double entry system by practicing in our template. However, this allows those who are not familiar with bookkeeping to keep abreast of their transactions while continuing to run their business.Ī word of warning: single-entry bookkeeping can lead to errors and therefore bigger issues down the line if not done properly. You do not need a double ledger to track the whereabouts of every transaction. It involves a daily or monthly summary of the incoming and outgoings of a business without detailed information about equipment, capital and inventory – which are marked informally as notes. This is a much simpler form of bookkeeping and is used by smaller firms to simply record what goes in and out. Just remember this: for double-entry bookkeeping you debit the receiver and credit the giver. This is easier to understand in practice so download our double-entry template to gain a better understanding. In layman’s terms, this means that you need to make two entries in your bookkeeping book for every transaction that occurs meaning the total debits must equal the total credits. if capital goes up, assets may go up if liabilities go up, assets may also go up. In other words, every time something happens in your company, two of the three fields mentioned above will be affected – i.e. It’s based on the fundamental accounting equation: assets = equity + liabilities. A decrease in either of liability or credit means an entry into the debit accountĭouble-entry bookkeeping uses a double ledger account for every entry in a system – for every transaction, a debit will have a corresponding credit and vice versa.If you have an increase in liability or capital, you have to mark the credit account.If you have a decrease in assets, mark the credit account.If you have an increase in assets, you need to write in the debit account.At the most basic level, double-entry bookkeeping makes two entries for every transaction. This is the slightly more complicated way of bookkeeping, but the upside is that it reduces mistakes and allows you to keep a detailed account of everything that happens. But fear not, here is a brief description of both to help you choose. You need to decide whether to adopt the single-entry or double-entry system. Unfortunately, there is not a one-size-fits-all approach to bookkeeping. Let’s dive in and have a look at what bookkeeping is and how to start doing it as a small business owner. No matter how small your business is, the books (your financial records) must be kept in check.Īside form making sure that you’re getting paid properly and on time, there’s also a great number of savings which can be made by learning how to do various administrative tasks on your own, learning what tax deductions you are eligible for and generally being diligent when running your business. You have taken perhaps the biggest step of your life and set up a business, but now there are costs coming from every angle. Running a small business is hard enough – trust us, we’ve been there.
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