Updated: Aug 24
Entrepreneurs, businesses, and decision-makers rely on bookkeeping to maintain tabs on their company's financial well-being and activities.
A company's financial transactions and spending activities can quickly become disorganized if proper bookkeeping procedures aren't followed.
Despite the necessity of bookkeeping, most business owners lack confidence in their ability to keep track of their company's financial records.
Many firms outsource this task to a bookkeeper because of a lack of enthusiasm or understanding. Here's a guide to bookkeeping to help you understand what it is and what are its types.
What Is Bookkeeping?
Every financial transaction performed by a business, from its inception to its dissolution, is tracked through the practice of bookkeeping.
The accounting system employed by the firm determines how financial transactions are documented. An invoice, a purchase order, a receipt, or some other financial record indicating that the transaction occurred are examples of this paperwork.
You can use hand-written entries in a diary or spreadsheet programs like Microsoft Excel to record the bookkeeping operations.
As a result, most firms today rely on specialist accounting software to keep track of their financial activities. You can use single- or double-entry bookkeeping to record financial transactions by bookkeepers.
Bookkeepers must know how to utilize credits and debits to balance a company's books.
Common Bookkeeping Types – Guide to Bookkeeping
It will be much easier to handle bookkeeping in the long term if you learn a little bit about it now. Here's our collection of the most fundamental sorts of bookkeeping:
This is the account through which all company transactions are recorded. Bookkeepers generally track cash revenues and disbursements in two separate notebooks.
It is essential to keep track of your outstanding debt. You have receivables if you sell goods or services and don't get paid immediately.
This account is used to keep track of money owed to clients. To deliver timely and correct bills, you must maintain this up to date.
The inventory account is where you keep track of all of your items. Doing a physical inventory count is an excellent way to ensure that the numbers in your records are accurate.
The account tells you exactly how much money has left already or is leaving your firm and when. Using this account, you'll be able to see exactly what you owe and avoid paying anyone twice.
It's the account that keeps track of all your outstanding debts and when you're expected to pay them back.
The account where you keep track of all of your sales income. Keeping accurate and timely sales records is an essential part of running any business.
You may track materials and items purchased for your business in this account. To calculate your company's gross profit, you must remove the cost of goods sold from your sales.
This is the account where firms keep track of their employees' pay and salaries. For many organizations, this is the most significant expense.
To fulfill the reporting and tax standards, this information must be correct.
This account keeps track of any revenues made by your firm that aren't distributed to the owners. The company's earnings are cumulative; they show up as a running total of all the money that has been saved since its inception.
You may use it to see how your business has progressed over time.
You will delegate many jobs as a business owner, but bookkeeping is the most critical. We hope this guide to bookkeeping was helpful for you. An accurate accounting record of all financial transactions, including profit and equity, is practically difficult to generate without it.