Bookkeeping is the foundation of any enterprise and basic bookkeeping tutorials will state so. By properly recording, classifying and summarising financial transactions, a firm is able to see where it stands at any point during the accounting cycle. Efficiency and accuracy are imperative during the implementation of any bookkeeping function. The importance of competent bookkeeping is highlighted by the fact it is mandated by federal law.
Understand bookkeeping: Bookkeeping is the recording (or posting) of daily financial transactions into a company's general ledger. Traditionally, bookkeeping involves taking the accounting information up to the point of arriving at a trial balance. Once the trial balance is developed, the information is turned over to the accountant, who prepares the financial statements.
Chart of Accounts
Use a chart of accounts. Basic bookkeeping tutorials may start with a chart of accounts. The chart of accounts was developed by the accountant, in most cases. The chart of accounts classifies and summarises financial transactions into appropriate general ledger accounts. Each account in a business is either a balance sheet account or income statement account. According to accountingcoach.com, accounts on a chart of accounts are listed in the following order: Assets, Liabilities, Stockholders' (or Owner's) Equity, Revenues, Expenses, Gains and Losses.
Code your transactions. Each financial transaction is assigned an account number that is located on the chart of accounts. The book-keeper inputs (or posts) that number into the firm's general ledger along with the transaction details such as dollar amount, quantity ordered or purchased, and vendor/customer information. The ending balance of each general ledger account is the amount that is used to develop the financial statements.
Use double-entry accounting. Double-entry accounting consists of journal entries containing debits and credits. Every financial transaction has a right and a left side. This keeps the information balanced. According to Meigs & Meigs, debits are on the left and credits are on the right.
Debits increase assets, expenses and losses. According to accountingcoach.com, basic bookkeeping tutorials state that debits also decrease liability accounts as well as decrease revenue accounts.
Credits decrease asset accounts. Asset accounts include cash, inventory, receivable accounts, prepaid expenses and supplies, states Meigs & Meigs. Credits also increase revenues, gains and liabilities.
Some book-keepers are specialised, according to Meigs & Meigs and accountingcoach.com, and concentrate solely on individualised accounting operations of the firm. Depending on the firm's size, book-keepers can work with only accounts receivable, which involves areas such as collections and customer service; payroll, involving employee issues such as garnishments, payroll tax forms, sick leave, vacation time and updating employee payroll data; or accounts payable, consisting of vendor relations, payment handling, vendor updating and budgeting requirements.
Know the importance of bookkeeping. Basic bookkeeping tutorials need to state the fact that good recordkeeping (on which bookkeeping is based) is a requirement as set forth by the IRS. If a company is found to have shoddy recordkeeping, the company faces the possibility of punitive penalties and interest.
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