The following five tips for learning basic bookkeeping will help both individuals and business people better manage their finances and avoid potential accounting problems.
Bookkeeping vs. Accounting
Anyone involved in bookkeeping will need to understand how it is different from accounting. Bookkeeping is a combination of accumulating, organizing, storing, and accessing activities related to financial information. Accounting is broader concept because bookkeeping mainly refers to the documentation and record-keeping aspects of accounting. Bookkeeping is the process of documenting all financial data, activities and transactions of a business.
Bookkeeping has two main purposes: the facilitation of daily operations and the preparation of reports, tax returns and financial statements. Like accounting systems, record keeping systems need internal control built into it to ensure accuracy and timeliness. Accounting encompasses all aspects of financial and economic activities.
Get Mentally Organized
Bookkeepers need to understand the basic stages of record keeping operations. First, bookkeepers prepare source documents for all operations and transactions. For example, businesses receive purchase invoices from suppliers when they purchase products and promissory notes from banks when they borrow money. Next, bookkeepers must enter source documents and transaction data into physical and software systems. All transactions have some sort of financial effect that must be recorded, such as paying employees, selling products and making sales. Then, bookkeepers regularly perform end-of-period procedures, such as monthly or quarterly reconciliations and reporting. This includes the preparation of financial, inventory and management accounting reports.
There are many types of accounting software available, but Intuit’s QuickBooks is one of the most popular for small-business owners because it saves time, reduces errors and provides data backups. Bookkeepers should learn how to set automatic backups of their work. Being able to print checks From QuickBooks increases efficiency by reducing redundant data entry and streamlining monthly reconciliations. Entering and paying bills through QuickBooks helps bookkeepers to better manage accounts payable. QuickBooks offers memorized transactions, which are a great tool to automatically enter bills, invoices, checks, payments and journal entries that regularly reoccur. Knowing how to record a journal entry in QuickBooks will surely save time in the future.
Learn Basic Terms
New bookkeepers all need to learn the basic terms that they will use every day. For example, terms include the balance sheet, which is a snapshot of the company’s finances, which must accurately show how the company’s assets equally balance against equity and liabilities. Assets include anything that a company uses in order to run the business, such as money, equipment, land and buildings. Liabilities are all the debts that the company owes, such as loans and bonds. Equity is the total amount of money invested in the company by the owners, which is either a capital account for small business or a stock shares for an incorporated company. An income statement summarizes the company’s financial activities over standard periods of time, such as months and quarters.
Never Stop Educating Yourself
Professional development is key to being a successful bookkeeper. You can educate yourself through taking select classes online or through community colleges. Some professional accountants offer inexpensive courses that teach the necessary bookkeeping skills. The best investment of your time will be to earn a certificate or degree in bookkeeping or accounting. There are many one- to two-year programs available that will provide all the knowledge and skills needed to succeed as a bookkeeper.
Improving your bookkeeping skills will increase the accuracy and integrity of your finances. Entrepreneur magazine offers additional tips for learning basic bookkeeping here.
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