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Bookkeeping 101: Everything you need to know

Generally, bookkeeping refers to the processes that ensure you record all the vital details and the financial status of a business or institution. You probably realize the importance of this process and its role in maintaining your businesses from the definition. Are you familiar with the fundamentals of bookkeeping? If not, this article is an excellent choice for individuals who wish to learn bookkeeping services. It will highlight everything you need to know about this operation. Read on!

What are bookkeeping and the role of a bookkeeper?

It is the process of recording critical details about a business, including financial transactions. In other words, the bookkeeper needs to record any financial transaction and keep these records. From the definition, the role of a bookkeeper mirrors that of an accountant. However, note that they are not the same thing. A bookkeeper records the financial transaction while the accountants analyze and interpret these records.

Key accounts that a bookkeeping include

From the details above, you can tell that bookkeeping involves all the financial accounts, and these are some of the essential accounts a bookkeeper must know. They include:

  1. Assets: in this account, you place everything of value. It includes all the money in your accounts, money that your customers owe you and the inventories. In other words, anything that you can liquidate to money falls under this category.
  2. Liabilities: If your business has any debts, then they fall under this category. It includes the account payable since they are the money you owe your staff.
  3. Income: As the term suggests, it refers to your business’s money either by providing services or selling products.
  4. Expenses: This term refers to water bills, electricity bills, salaries, and the money you use to attract potential clients.
  5. Equity: the bookkeeper needs to know how your business is doing, and this is where the equity account comes to the rescue. It is the money left after subtracting the liabilities from your income and the assets.

What does modern bookkeeping in businesses involve?

  • Set up the accounting software: You need to set up the accounting software, which involves connecting your bank accounts, data entries of every transaction and reconciling these transactions. Note that most tasks are automatic under the software, so you need to learn more about the software.
  • Choose the best entry accounting system: You can settle for the single-entry system or the double-entry accounting. The former is simple but less safe, while the latter is complicated but ensures your records are error-free.
  • Settle for an accounting method. In this step, you will determine whether you need cash-based or accrual-based accounting. Under cash-based, you only work with the money in hand while in accrual; you record bills that aren’t there yet and record funds even when money isn’t ready.
  • Transactions management: The bookkeeping process will involve keeping yourself up-to-date with the transactions that occur. You need to ensure that all the transactions are proper and well-placed in the correct accounts.
  • Payroll system: You may include this system in the bookkeeping software or create a separate software depending on your preference.
  • Coordination of tax: All the businesses need to pay tax to remain in the government’s good books. This step requires you to work with a tax specialist to offer you the guidance you need in this sector.
  • Management of financial documents and statements: This feature is quite important since it requires a bookkeeper to pay attention to all the available financial documents and ensure they are well-organized.

Conclusion

From the definitions, bookkeeping is a necessary process that manages all the financial transactions of an organization. This article explains some of the key details that the process involves and the main things a bookkeeper needs to pay attention to for an effective process.

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