Bookkeeping

Bookkeeping, a word that instils fear and panic in thousands of small business owners. I am here to help allay some of that fear by helping you to understand the basics of bookkeeping.

The first thing that you need to understand is that proper bookkeeping is essential to every business and if you ever get to the point where you just aren’t able to devote the time to do it properly or are struggling to understand what needs to be done, you should find a qualified bookkeeper who can help you.

Bookkeeping is based on the double-entry system – money comes in, but it also goes out. Every transaction must have a two-sided entry. These two sides are known as Debit (DR) and Credit (CR). For each transaction, the DR side must equal the CR side. For example, if you buy a pencil for 10p, you have paid money out but have also gained a pencil.

A very simple way to start keeping your records is to use a pen and paper and to use T-accounts. Set up each account (Cash, Stationery, Sales, etc) as a T-account with one side as the Debit side and one as the Credit Side.

When you enter a transaction assign a number to it so that you can find both corresponding entries. You also need to make sure you date your entries.

Here is an example of how to record a sale. You make a sale of £5.00:

All of your T-accounts now look like this:

At the end of each month, total up each T-account. The total DRs should equal the total CRs.

Using T-accounts is a very simple way to keep track of your accounts.

Lesson 2 will look at the different types of accounts: Assets, Expenses, etc.

If you have any questions on today’s lesson, or would like help answering other bookkeeping questions, please leave a comment below or contact us via the Contact Us Page, our Facebook Page, or on Twitter.

When people ask me what I do for a living, the majority of people give me a look of sympathy and some even get a look of disgust on their face. I’m going to tell you a secret though….I LOVE BOOKKEEPING!!

I have always had an affinity for numbers right from a young age. In high school, I loved algebra and calculus. I didn’t enjoy geometry or statistics quite as much, but give me complicated equations to work out and I was a happy girl. I think my interest in bookkeeping actually started when one of my older sisters took an accounting course in high school and I watched her do some of her homework. I took that course myself and I was hooked. It was my first proper introduction to the world of bookkeeping and I learned about the very basics that I talked about in The Basics of Bookkeeping: Lesson 1.

I didn’t actually take any further accounting courses until my second year of university. I then moved to the local college and excelled at all of the courses I needed to take. I graduated with a Business Administration Accounting degree- I was qualified to do bookkeeping.

Strangely though I didn’t do any bookkeeping until I moved to the UK in 2003, when I did a home learning course to brush up on my skills.

Bookkeeping is all about numbers and numbers can tell a story. When all of the receipts, invoices and all of the other financial information is entered into a set of accounts properly, you get a story about your business. Just like an author, a bookkeeper writes story, but in numbers

So there is my secret – I LOVE NUMBERS & BOOKKEEPING. I am doing exactly what I love.

If you would like to know how I can help you tell your business story, contact me via the Contact Us Page, our Facebook Page, or on Twitter.