Introduction to bookkeeping and accounting Open University


Assets also include fixed assets which are generally the plant, equipment, and land. If you look you look at the format of a balance sheet, you will see the asset accounts listed in the order of their liquidity. Asset accounts start with the cash account since cash is perfectly liquid.

Become Familiar with Bookkeeping Statements

With so many moving pieces (including assets and liabilities, and income and expenses), small business owners must stay on top of it all. Accountants rely on bookkeeping records to analyze and advise on the financial activity, health, and growth potential of a business. The American Institute of Professional Bookkeepers offers certification for experienced bookkeepers. You will learn how to record costs, value inventory, calculate depreciation, analyze financial statements, and use software programs. The courses cover bookkeeping, Microsoft Excel, business math, and payroll administration. Both accountants and bookkeepers work to maintain accurate records of finances, and sometimes the terms are used interchangeably.

What you need to set up small business bookkeeping

Even if you aren’t planning on growing any time soon, you need to have a sense of how much money is coming in versus what is going out. On top of that, you need the data used in bookkeeping to file your taxes accurately. At the end of the accounting period, take the time to make adjustments to your entries. For example, you may have estimated certain invoices that are later solidified with an actual number. When manually doing the bookkeeping, debits are found on the left side of the ledger, and credits are found on the right side.

The first seven steps of a bookkeeping process

Because the funds are accounted for in the bookkeeping, you use the data to determine growth. Bank reconciliation is the process of finding congruence between the transactions in your bank account and the transactions in your bookkeeping records. Reconciling your bank accounts is an imperative step in bookkeeping because, after everything else is logged, it is the last step to finding discrepancies in your books. Bank reconciliation helps you ensure that there is nothing amiss when it comes to your money. An accountant usually generates the trial balance to see where your business stands and how well your books are balanced.

What does a bookkeeper do?

  • His book became the teaching tool for bookkeeping and accounting for the next several hundred years.
  • For example, there’s cash basis accounting and accrual basis accounting.
  • You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
  • The chart of accounts lists every account the business needs and should have.

These services are a cost-effective way to tackle the day-to-day so that business owners can focus on what they do best, operating the business. For business owners who don’t mind doing the data entry, accounting software helps to simplify the process. You no longer need to worry about entering the double-entry data into two accounts. Single-entry bookkeeping is a straightforward method where one entry is made for each transaction in your books. These transactions are usually maintained in a cash book to track incoming revenue and outgoing expenses.


Bookkeeping for Your Small Business

At least one debit is made to one account, and at least one credit is made to another account. You also have to decide, as a new business owner, if you are going to use single-entry or double-entry You record transactions as you pay bills and make deposits into your company account.

While it may be easy to confuse the two, they are not the same thing. Accounting is the umbrella term for all processes related to recording a business’s financial transactions, whereas bookkeeping is an integral part of the accounting process. Bookkeeping is the process of tracking and recording a business’s financial transactions. These business activities are recorded based on the company’s accounting principles and supporting documentation.

  • A proper financial data management system can provide valuable, actionable insights and prevent problems, such as skimming fraud.
  • Specializing in a career field can help to set you apart and lead to career stability and longevity.
  • To uncover errors, check whether you forgot to record an entry in either column of your accounting ledger.
  • A cash register is an electronic machine that is used to calculate and register transactions.
  • Bookkeeping traditionally refers to the day-to-day upkeep of a business’s financial records.

How much is QuickBooks for small businesses?

Debits and credits should always equal each other so that the books are in balance. Getting your books together and producing financial statements is the only way to gauge the financial health of your small business. When hiring external team members, keep in mind that some of the responsibility still falls to you as the proprietor. The expected job decline is primarily due to cloud computing and other software innovations automating Navigating Financial Growth: Leveraging Bookkeeping and Accounting Services for Startups tasks that a person would normally do.

If you’re ready to take bookkeeping off your plate and delegate this task to someone else, it can be hard to know where to look. Start by reaching out to other business owners for recommendations, searching online for providers and checking out reviews on Google or Yelp. If you don’t feel comfortable with a freelancer, there are many firms that offer bookkeeping services as well. The income statement, also called the profit and loss statement, focuses on the revenue gained and expenses incurred by a business over time. The upper half lists operating income while the lower half lists expenditures.


As a small business owner, she is passionate about supporting other entrepreneurs and sharing information that will help them thrive.

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