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Bookkeeping Basics for Small Business

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Bookkeeping Basics for Small Business

By JamieD
Published: March 24, 2010 Updated: February 16, 2011

Whether you keep your books on paper, through computer software, or hire an accountant or bookkeeping expert, proper bookkeeping practices are important to the operation and survival of any business. Without them, your business is susceptible to not only cash flow issues, but potential legal problems as well. To help business owners have a better understanding of smart bookkeeping practices, we've compiled a quick guide on
the basics.

Business bookkeeping serves two purposes - to enable the IRS to evaluate your operations, and to help manage your business. Your books make up one very important part of your overall business records and should include all transactions made by your business. As a standard practice, several pieces of information should always be kept in your books.

Revenues and Expenses

How much money is going out, where it's going, and what money is coming in are all questions that can be answered by recording the revenues and expenses of your business transactions. Records can be maintained through a journal,
a popular method that details receipts and expenses, or a ledger, a method that records transactions as credits and debits.

Cash Expenditures

Important to record the cash your business spends so you'll have an accurate number of expenses each year. Writing reimbursable checks or keeping petty cash records are both valid methods of documenting cash expenditures.

Inventory

Maintain records of all inventory to prevent stealing and misplacing merchandise, keep inventory holdings to a minimum, and track business trends. Dates purchased, stock numbers, purchase prices, dates sold, and sale prices are all relevant information for inventory records.

Accounts Receivable and Payable

Always keep track of what customers owe you and what debts you owe others. It's prudent to record as much data as possible including invoice dates, numbers, amounts, terms, dates and amounts paid or due, balances, and client information.

Employees

Hiring even one employee invokes your responsibility to file and pay forms and payroll taxes. Employers are responsible for maintaining employee forms such as the W-4 (Withholding Allowance Certification) and the I-9 (Employment Eligibility Verification). You are responsible for maintaining records on withholding, employer matching, unemployment, and worker's compensation.

For more information check out the IRS page on Employment Tax Recordkeeping and the Department of Labor's Recordkeeping Guide.

It doesn't matter how you choose to keep your books as long as you find the most efficient way to do it. If you decide to do it yourself, it is a good idea to consult with an accountant or bookkeeping expert to keep your business on track!
Check out the community thread on bookkeeping to see what other small business owners are talking about and share your thoughts.

Message Edited by JamieD on 09-01-2009 12:14 PM

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Comments:

Great article. Too many times you see people take bookkeeping for granted. It's a pivotal tool in running a business. It's not only necessary, but a great tool in regulating income and expenses and tracking other various items. Thanks so much. NottinghamCPA.com
Excellent article! Bookkeeping is vital for business to manage resources properly and for the purpose of paying taxes. Thanks! www.danahenryandcompany.com , a small business bookkeeping company in Weatherford, TX
Millions of people around the world are indulge in the business, but many of them of us are mot aware about the process of book keeping and accounting. Its nothing so hard to understand. Its just a easy job. Book keeper basic goal is to keep the track of your income and expenses which increases the chance of making profit, and to collect the financial information necessary for filling various tax. Various things should be kept in mind to be the book keeper. He should always know the value of money assets and should keep the receipt and records of every payments. Always summarize the income and should create a chart of it. http://awolfbookkeeping.com/services/
These are the basics. Like Golf, it takes a little time to learn and a lifetime to master. I am a CPA that specializes in small business accounting. We have DIY program where we help you save money on fees, but guide you through all tax matters. visit http://www.markbryantcpa.com
This is a very useful information. Thank you.
Excellent ideas! The way you laid out this post made a lot of sense. You really helped me and this was exactly what I was looking for. You made it very easy for me to understand, and it greatly helped me out. I'm sure you'll reach so many people with what you've got to say
This is a very good post! I admire the way you shared this topic! Keep it up a good job! credit report and score. Always verify the truth before taking any legal actions. Hope this problem is already fixed.

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