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Bookkeeping Basics

Key Concepts

Here are some key concepts of bookkeeping:

  1. Double-entry accounting: The practice of recording each financial transaction in at least two different accounts to ensure accuracy and consistency.
  2. Debits and credits: The basic building blocks of double-entry accounting, where a debit is an entry on the left side of an account and a credit is an entry on the right side.
  3. Chart of accounts: A list of all the accounts used in an organization’s financial records, including assets, liabilities, and equity.
  4. Journal entries: The individual entries made in a journal to record financial transactions, which are later transferred to the general ledger.
  5. General ledger: A record of all the financial transactions that have taken place within an organization, organized by account.
  6. Financial statements: Reports that provide an overview of an organization’s financial performance, including the income statement, balance sheet, and statement of cash flows.
  7. Accrual vs cash basis accounting: Accrual basis accounting records transactions when they occur regardless of when cash is received or paid, while cash basis accounting records transactions only when cash is received or paid.
  8. Budgeting: The process of creating a financial plan for an organization, including projected income and expenses.
  9. Auditing: The process of reviewing and verifying an organization’s financial records to ensure accuracy and compliance with financial regulations.

Why Bookkeeping Matter?

  • It helps you catch more tax deductions
  • It can help you get a business loan
  • It can helps you catch financial mistakes
  • It gives you a clear picture of where your money is going

Steps to Follow

  1. Separate your business and personal expenses
  2. Choose between single entry or double entry accounting
  3. Choose between the cash vs accrual method of accounting
  4. Choose a bookkeeping system
  5. Categorize your transactions
  6. Organize and store your documents
  7. Make it a habit

Learn More

Video: Bookkeeping Basics for Beginners

Vdeo: Bookkeeping for Small Business Owners