Bookkeeping Basics

Bookkeeping Basics

 

Many people think bookkeeping and accounting are the same things. However, bookkeeping is only one function of accounting. Accounting encompasses all functions that manage the financial affairs of a company. Accounting professionals prepare reports partly based on the work done by bookkeepers.

All kinds of records-keeping tasks are performed by bookkeepers. These are just a few of the many tasks they perform:

 

They prepare the source documents that are used to manage all business operations, such as buying, selling, and transferring money, collecting, and paying it. These documents include purchase orders, invoices, and credit card slips. They also include time cards, expense reports, timesheets, time sheets, time cards, and time cards. The financial effects of transactions and other business events are also determined by bookkeepers. These include making sales, paying employees, and buying raw materials or products.

Bookkeepers also record financial effects in journals and accounts. They are two distinct things. A journal is a chronologically arranged record of transactions. An account is a page or record that contains each asset and liability. Multiple accounts can be affected by one transaction.

 

Bookkeepers create reports at the end of a specific period, such as daily or weekly, monthly, quarterly, annually, or every three months. All accounts must be current to do this. To ensure they are as error-free and up-to-date as possible, inventory records should be updated.

Bookkeepers compile complete lists of all accounts. This is the adjusted trial balance. A small business might have only a few accounts. Larger businesses may have over 10,000 accounts.

The final step is to bring all bookkeeping for a fiscal calendar year to a close.

Personal Accounting

 

You should balance your checking account periodically if you have one. This is to account for any difference between what’s on your statement and what was written down for deposits and checks. Most people balance it once per month when they get their statements by mail. However, online banking allows you to do it every day if your banking habits are not so good.

 

To note any charges that have not been recorded in your bank account, balance your checkbook. These can include ATM fees and overdraft fees as well as special transaction fees and low balance fees if your account has to be kept at a minimum. To record any credit that you haven’t previously noted, your checkbook must be balanced. These could include automatic deposits, refunds, or other electronic deposits. You might have an interest-bearing checking account, and you should record any interest earned.

 

Also, you need to determine if there have been any mistakes in your records or if the bank has committed any.

 

We all fear the annual filing of federal income tax returns. CPAs are often used by many people to file their returns. Others do it themselves. The following items are included in most forms:

 

Income is any income earned by working or owning assets. There are no exemptions to income tax.

 

Personal exemptions: This is an amount of income exempt from tax.

 

Standard deduction: Some personal expenses or business expenses may be taken out of your income to lower the income tax. These expenses can include interest on your home mortgage, charitable donations, and property taxes.

 

Taxable income – This is the income subject to tax after personal exemptions or deductions have been taken into account.