Bookkeeping 101:

Bookkeeping 101

What is bookkeeping?

Bookkeeping is the process of keeping organized records of your business’s financial transactions, such as income and expenses.

It helps you keep track of your business’s financial performance with insights that better support informed decisions on managing resources.

Examples of records bookkeeping captures are invoices, purchase orders, receipts, bills, debts, etc.

How to do bookkeeping?

Below are steps to keep accurate records of your finances – accounts payable, accounts receivable, liabilities, petty cash, and assets.

  • Collect all financial documents
  • Create a chart of accounts
  • Record financial transactions
  • Make adjustments
  • Prepare financial statement

Collect all financial documents

The first thing to do in bookkeeping is to collect all your financial documents, such as invoices, bills, receipts, bank statements, payroll records, and other documented transactions.

Create a chart of accounts

You need to create a chart of accounts with a list of all your documented business transactions categorized into income and expenses. Categories could be taxes, insurance salaries, supplies, rent, etc.

How to do bookkeeping

Record financial transactions

This is where you enter details of the transactions—date, amount, and description—into a journal entry or general ledger. You should assign records to the correct category to avoid accounting errors.

Make adjustments

After recording financial transactions, it’s necessary to adjust the financial records to reflect the business’s financial activity accurately.

Please ensure that the debit and credit account records are equal and without errors.

Any difference in the total balances indicates missing records, which you should sort out before transferring them to the official financial statements.

Prepare financial statement

When you have made all necessary adjustments, you prepare financial statements—such as the balance sheet, income statement, and cash flow statement.

The financial statement summarizes the business’s financial performance and helps you with insights for informed decision-making.

You could prepare the statement by hiring someone at HMI Keeper.