Whether you do your own bookkeeping in Victoria BC or you have a bookkeeper, there are bookkeeping basics that you need to know. Not only it will help you in better understanding how to record your business transactions, you will also be able to know what your bookkeeper is doing. A bookkeeper doesn’t provide you his or her opinion on your business transactions, so you will still need to know what is going on so you will exercise your control over your own business.
Here are some of the main bookkeeping basics you can’t ignore.
- Single or Double Entry – These are the basic types of entry in bookkeeping. Depending on your business size, you need to know which one to use. A single-entry bookkeeping is a straightforward entry, usually used for small businesses with low volume of transactions, where you record the transactions as you pay your bills or make deposits into your company’s account. For double-entry bookkeeping, you need to enter at least two entries for each transaction. You will need to record the debits in one account and the credits into another.
- Accounting System – For accounting system, there is cash accounting system and accrual accounting system. Again, depending on your business type, you need to know which one to use. Cash accounting system is when you record the transactions when cash actually changes hands. On the other hand, if you’re giving credits for your customers, or if you request credits from your suppliers, then you will have to use the accrual accounting system. You still have to record the transactions right away even though cash is not involved and will only change hands at a later time. You can always start with cash accounting system if your business is still small and change to accrual system in the future.
- Balancing Your Books – For most businesses, this is the part that can give them potential headache. To help you better balance your books, you need to make sure that you always keep a careful and accurate record of the business transactions in your company. These include assets, liabilities and equities, all recorded correctly in their right places.
- Balance and Income Sheet – These are the important financial statements that you need to know about in your business. Balance sheet shows the assets, liabilities, equities, what you owe as well as you and your investors’ investments. An income sheet shows revenue statement, financial performance, earning and operating statement.
- Bookkeeping Terms – You need to familiarize yourself with the terms used in bookkeeping so you don’t get confused or lost when you’re updating your books. Being well versed in the basic terms can help you save time from trying to understand when you’re recording your business transactions.