Bookkeeping 101: Bookkeeping Basics for Small Businesses

An accountant’s role focuses on accounting services like interpreting and analyzing the data provided by bookkeepers. Bookkeeping begins the moment a transaction is completed via an invoice, sales receipt, or expense report. Any time a company makes a financial transaction, it must be recorded promptly and accurately – and this is where bookkeepers come in. Professionals in this role are tasked with recording, classifying, tracking, and organizing the finances of a company. Additionally, bookkeepers are also responsible for creating financial reports and managing cash flow, among a plethora of other responsibilities.

• He also states the importance of protecting your financial information by backing up your data.
• Similarly, if you pay for office supplies in February, you record the expense in February, regardless of when you actually used the supplies.
• The chart of accounts lists every account the business needs and should have.
• This can be a lifeline for small-business owners who need to make quick financial decisions based on the immediate health of their business.
• A customer buys something on credit and promises to pay $100 next week.

Bookkeeping 101: How to Get Started with Bookkeeping

• Bear in mind that, in the world of bookkeeping, an account doesn’t refer to an individual bank account.
• These reports help stakeholders make informed decisions and identify potential areas of improvement.
• Most businesses now use specialized bookkeeping computer programs to keep books that show their financial transactions.
• For example, when money comes from a sale, it will credit the sales revenue account.
• To uncover errors, check whether you forgot to record an entry in either column of your accounting ledger.

Adopting these best practices in bookkeeping can help reduce the risk of errors while laying a strong foundation for informed decision-making and ongoing financial success. Maintaining accuracy in bookkeeping is essential for the success of a company. Furthermore, there are different types of bookkeepers based on the size and nature of a company.

Step 2: Record Transactions

• If the ratio of income to debt is small, you’re operating with a narrow profit margin.
• No matter what type of business you operate, an understanding of bookkeeping best practices is essential for keeping your business running smoothly, now and in the future.
• And accrual-based records transactions when they’re earned or incurred — even if cash hasn’t changed hands yet.
• These are methods used by most people in the accounting profession, so if your bookkeeping is ever questioned, your methods will be accepted by others.
• The next part of the bookkeeping cycle is determining the financial effects of the transactions.

Our team makes sure you are ready to fly through your next VC’s accounting, HR and tax due diligence. And when you use us as your bookkeeper, we set up and keep up-to-date a due diligence folder so you can get that What is Legal E-Billing next round of fundraising. In the fast-paced world of New York City’s startups, managing tax obligations with precision and foresight is crucial. At Kruze, we offer unparalleled tax advisory services that cater specifically to the diverse and ever-evolving needs of NYC startups.

Chart of Accounts

The general ledger notates the account number to which the debit or credit is applied. The best accounting software automates a lot of the process in journal entries for regular debits and credits to help eliminate possible errors in data entry. Certified Bookkeeper The basics of bookkeeping form a foundation for financial management and decision-making within a company. The most basic aspect of the role is keeping accurate records of all financial transactions made by a company, including sales, purchases, payments, and receipts. Another part of the job is organizing and categorizing these transactions. Bookkeepers record and classify financial transactions, such as sales and expenses.

Our Services

Now that you understand the basics, it’s time to put your knowledge into action. Top angel investors and VCs refer Kruze because they trust us to give the right advice. Our clients are portfolio companies of top technology and Silicon Valley investors, including Y-Combinator, Kleiner, Sequoia, Khsola, Launch, Techstars and more.