10 Common Mistakes in Bookkeeping

Mistakes during bookkeeping can lead you to a financial muddle and create great consequences that can send your business spiraling down. Statistics have shown that small businesses fall in the first five years due to the lack of proper bookkeeping process.

With a good grasp in knowing what not to do in the bookkeeping process, will help you to generate your income statement better. Here are some of the mistakes commonly done, so try to avoid these. If you’ve just realized that you’re doing some of them, be sure to change your ways in managing your business’s finance!

  1. Lack of knowledge – Even if you’re using the latest accounting software, without proper understanding of the general accounting principle, you will end up feeling more frustrated than before.
  2. Procrastinating – Do not put off entering the transactions to the very last minute as you will end up writing in a hurry without thoroughly reading and making sure everything is properly written, since all the work is piled up to the ceiling.
  3. Not having a separate bank account – Once your business is registered and has its own business name, create a bank account in its name immediately. Do not combine your personal financial expenses with the business-related transactions.
  4. Not paying any concern to petty cash – Despite the name, it’s not a trivial matter. At the end of the month, the slips of having the money-withdrawn should total up with the original amount.
  5. Using the wrong accounting method – There are two accounting methods, cash and accrual. Using the wrong method will leave you confused at the end of the month.
  6. No back up data – A paperless environment is the most-favored method nowadays, but when it comes to keeping track of your financial statements, paper is the best way to go. You are required to produce proper financial documents during auditing.
  7. Not reconciling accounts – This is an important process, as you need to make sure that the balance in the book is even with the balance shown by the bank.
  8. Not filing bank statements – If you skip this, you will need to call the bank to have the statement sent to you.
  9. No filing system for invoices – Unpaid and paid invoices should be labeled accordingly with the account names in chronological order to avoid mix-ups.
  10. Sales tax – Big yawn, eh? But remember, taxes are important. Failure to account them can lead to fines or penalties and incorrect data entered will lead to over-stated sales taxes due.

 

10 Bookkeeping Terms and Why You Need To Know Them

Basic bookkeeping terms are essential, as you will need to understand what you will be dealing with while processing any transactions or recording any expenses done. This also helps you to understand what your bookkeeper in Victoria BC is telling you at the end of each month, and knowing the terms will help you to not feel alienated when he or she explains anything that is related to your business. It will also avoid you from getting lied to or confuse you when your balance does not equal.

There are a few fundamental terms used in bookkeeping, such as:

  1. Accounting period – This explains the time frame for financial information that are being tracked. Most businesses have their accounting period in duration of a month and have their reports done quarterly or annually.
  2. Accounts payable – This tracks any outstanding bills from vendors or individuals where the company buys their goods.
  3. Accounts receivable – This account tracks the sales done through credit, which is where the customer is given credit directly by the store and the payment will be collected at a later date. It has nothing to do with sales by credit card.
  4. Depreciation – This method is to count the value of the business’s asset, which ages over time and has their values decrease. Assets such as buildings and equipment will need to be replaced after a few years.
  5. General Ledger – The notable of the bookkeeping system, this is where the company’s accounts are summarized systematically.
  6. Interest –When a company buys an asset using a loan, the amount to be paid will be added with the interest, which is based on the percentage of the amount that you borrowed. The bank calculates the amount of interest to be added.
  7. Inventory –This is the list of any goods that the company intends to sell to the customers, and each are tracked accordingly during the duration of time.
  8. Journals – This is where the bookkeeper keeps all the business’s daily transactions in a chronological order. There are three active accounts, and all of them have their own account.
  9. Payroll –Salary or payroll, are expenses from the company as this is when they pay their employees. It also includes any payroll to the government, which includes the taxes on behalf of the employees.
  10. Trial Balance – This is the trial stage of balancing out the books before producing the final financial statement report and closing of the book over the accounting period. Any errors should be rectified and redone at this stage.

Please contact me if you need help with your bookkeeping.

10 Things You Need To Know About Bookkeeping

Whether or not you decide to hire a bookkeeper, it’s a good idea to know the basics of bookkeeping. Because good accounts are the basics of a good business, you need to make sure you know what it’s all about to save you not only the trouble of having someone trying to con you, but also save you time and money in having to find for a specialist only when it is tax season.

Here are the 10 things you need to know about bookkeeping.

  1. Bookkeeping Entry – There are two types of bookkeeping entries that you need to understand so you know which one to use for your business. A single-entry bookkeeping is usually for small businesses that have low volume of transactions while double-entry bookkeeping is for businesses that are more complex and deals with high volume of transactions.
  2. How To Record – You will need to specify what type of transactions took place in your business. You will need to have separate records for each type so you will know what went where.
  3. Accounting System – You either use the cash or accrual accounting system. Cash accounting system is used by home or one-person business where you record every transaction when cash exchanges hands. Accrual accounting system is used when credits are involved, either for your customers or when you’re requesting it from your suppliers.
  4. Debits and Credits – These are the records of incoming and outgoing transactions in your business.
  5. Accounting Cycle – This is where you record each transaction as it happens even when the cash is yet to exchange hands. Pretty much like how if you were to keep a diary of what’s happening in your life, these transactions are recorded chronologically in your accounting journals.
  6. Balancing Your Books – This is where your spending and transaction tally. You will record your assets (what you own), your liabilities as well as your equities in order to have an effectively balanced book.
  7. Chart of Accounts – This is a list of accounts you use to define each type of items from which your money is spent on and/or received.
  8. Financial Statements – These are important financial statements for your business. It will help you to file your taxes accurately as well as provide you an insight on how your business is doing.
  9. Bookkeeping Terms – Familiarizing yourself with the common terms in bookkeeping can greatly assist you in doing your books. Even though you will at one point get used to them, it’s good to learn and understand them beforehand.
  10. Software – You can choose to do your bookkeeping with or without a computer. But knowing what the good accounting software you can use are will help you to keep cleaner, more accurate and efficient books.

Are you looking for a bookkeeper Victoria BC? Please contact me as I’d love to help.

Bookkeeping Basics You Can’t Ignore

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Why Do You Need A Bookkeeper For Your Business?

In my last post I explained what a bookkeeper does. You might be wondering why you need bookkeeping in Victoria BC for your business.

A bookkeeper’s task is to assist you in keeping an accurate and updated record of your business transactions. He or she will record and enter the business transaction in your company’s ledger so that at the end of the month, you will be able to produce correct income statements and balance sheets.

Hiring a bookkeeper for your business will help you a long way in managing your business better. Here are some good reasons why you do need a bookkeeper for your business

  1. Save Time – It’s more important to work smart than to work hard. Having a bookkeeper to manage and keep a record of your business transactions can save you valuable time that you can use to manage other aspects of your business better.
  2. Assurance – Bookkeepers are experts and professionals in keeping record of your business. So knowing that you have someone who knows what he or she is doing will take one thing less off your mind.
  3. Extra Pair of Eyes – Having a bookkeeper doesn’t mean you give away your business financial matters to someone else because bookkeepers don’t provide opinions on how you should run your business. His or her sole task is to assist you in keeping an accurate record of your business transactions. With his or her help, you will be able to have someone to help you out in case you miss out anything.
  4. A Costly Mistake If You Don’t – Many small business owners tend not to hire a bookkeeper for their business. Spending time to do it yourself can incur you losses if you don’t do it correctly. Hiring a bookkeeper is not as expensive as you think it might be. For a small business, you don’t have to hire a fulltime bookkeeper because you can get a part-timer or outsource it.
  5. Save You The Worry Before Tax Season – Keeping your books in order before your tax is due can be a great way to save you the time and trouble. If your books aren’t in order, you will need to hire a CPA to get them organized. This can cost you up to $150/hour and the work doesn’t usually get done within a few hours.

Deciding to hire a bookkeeper can help your business grow as you will be able to concentrate more on its growth and not to mention the peace of mind you will have knowing that someone reliable is doing your bookkeeping for you.

What Does A Bookkeeper Do And Should You Hire One?

If you have a business here in Victoria BC, you’re probably already aware of the term bookkeeper and bookkeeping. As of now, you may have been doing your own financial records, recording down every single transaction that is happening within your business. So basically what you’re doing is bookkeeping.

A bookkeeper, then, is someone who is responsible for the company’s business transactions. He or she will record these transactions in the company’s ledger. Being a bookkeeper means being accurate, efficient and well versed in not only debits and credits, but also many other aspects of bookkeeping such as account payable processes and procedures, account charts, and payroll.

Most of these tasks, especially debits and credits, are done on a daily basis. It’s better for a bookkeeper to keep an updated ledger by recording the company’s business transactions on a daily basis to ensure a more accurate record rather than compiling the records and only enter them at the end of the month. A meticulous and thorough bookkeeper is an asset to a company for he or she is able to know where every single cent goes to and can tell right away if something is not right.

Now as to whether you should hire a bookkeeper or not, is really up to you.

However, a lot of business owners do not hire a bookkeeper early enough. Most business owners tend to wait for their business to grow and expand before they finally decide to hire one.

As a matter of fact, it’s a better idea to hire a bookkeeper at the early stage of your business because as a new business, you will have more challenges and obstacles to face. Having a bookkeeper to maintain and look after your business transactions will allow you more time to concentrate on building and expanding your business. There is no need for a bookkeeper to be in your office every day because he or she usually comes in on a weekly basis to discuss things over with you or bring any matter to your attention. Plus with current technology and conveniences to share things online, you’re able to communicate with your bookkeeper at any given time.

A bookkeeper is someone who does these tasks day in and day out, so they tend to become very good at it. Their efficiency and competency can take one thing less off your mind. A bookkeeper is not someone who provides his or her opinion about your business transactions, so you will still have control about your business finances. His or her main role is to solely assist you in keeping an updated and accurate record of your business transactions.

If you need a bookkeeper in Victoria BC, contact us as we’d love to help free up your time and relive some stress from your daily life.

What Is The Difference Between Bookkeeping And Accounting?

In my last post I explained what bookkeeping is and what a bookkeeper does and if you should hire one.

The term bookkeeping and accounting may sound scary or even worrying, especially if you did not take an accounts subject in school or university. Although they are of different term, they are in the same category (both have something to do with keeping financial records) and can be easily differentiated even if you just scratch the surface of the terms. Let’s find out more about the differences in these terms, shall we?

Bookkeeping, or sometimes known as record keeping, is a term used for the action of putting a record on any financial infrastructure of an entity. Be it for an individual or for a business, bookkeeping is an important activity for both. This term is a necessary subset of accounting, since whatever that is recorded in the journals or ledgers will be used for the final process of accounting.

It surrounds the process of accumulating, organizing, storing as well as accessing the financial information base of the entity for two very basic purposes, which are:

  • Facilitating the daily operations of the entity
  • Preparing financial statements, tax return, and internal reports for the managers

The act of processing the recording in a chronological order, jotting down any transaction details of the business entity daily, contributes in forming the accounting information. The process is done in a meticulous way that is complete, accurate and timely. It needs to be done this way and there is a quality control to maintain it, called the internal control.

On the other hand, accounting is a much broader term as it touches many other processes as it domains the whole design of the bookkeeping system. It establishes a control that makes sure the entire system works well in every aspect and thoroughly analyzes and verifies the whole recorded information. Accountants pattern all internal controls for the bookkeeping system and these minimize any errors in recording the large number of activities that an entity engages over a period of time.

Accounting bounds the problem in measuring the function of financial reporting of values as well as performance measures to those who need the info. These reports are gathered from the information accumulated from the bookkeeping process such as the financial statement and tax returns. Business managers as well as investors are some of those who find great importance in depending on the performance and conditions of the activity of the financial reports information.

With this, we know that the action of bookkeeping helps a lot in the overall processing of accounting, as these two help in communicating with stakeholders or other interested organizations.

 

 

What is Bookkeeping

Bookkeeping is one of the components in the accounting of a business process. Although it may sound like a job for a librarian, it is actually quite the opposite, as it involves a bookkeeper and an accountant.

A bookkeeper is a person who records the daily financial transactions of a business or a person who records his daily transactions for personal finances. Despite done by a person whose job is to book keep or by a person who does it for personal references, their position is similar as at the end of the day where they keep records of any financial affairs that have taken place.

This includes keeping records of the purchases, sales, receipts, and payments by an individual or organization. It is done in an extremely systematical way to avoid the individual or business from getting into a financial muddle. In this day and age, getting into a financial disorganization due to carelessness done by the bookkeeper is not something you would want to go through.

Some methods used in the process of bookkeeping are the single entry system and the double entry system. This can help you to differentiate whether the first method is better for you to use and apply for yourself or the latter. However, another process that includes you to record any financial settlement is a bookkeeping process since we are all about the documenting of investments.

Individuals who use personal finance software more commonly use the single entry system since they balance their checkbooks at the end of each month. All of the transactions done are recorded only once in a one sided accounting entry, which is used to maintain systematic information of the finance. Small businesses use this method too to record their “bare essentials”.

The double entry method is used mostly by big organizations that deal with other organizations and clients and their journal summaries are then transferred to their respective ledgers. Their recordings carry the names of the accounts and contain three columns: the names of the account in the ledger (which have a non-zero balance), the debit column and the credit column.

For both entries, the columns are then each totaled to give a summary for the period of typically a month. The bookkeeper will carry out a partial check called the unadjusted trial balance in order to make sure that the columns have an agreement in their total. Any errors are then rectified and adjusted before an accountant, who does changes in some of the account balance, checks it.

If you need a bookkeeper in Victoria, please contact me as I would love to help.