Beyond the Book
In addition to the material in the print or e-book you’re reading right now, this book also comes with some access-anywhere goodies on the Web. Check out the free Cheat Sheet at www.dummies.com/cheatsheet/bookkeepingaio for some handy bite-sized bookkeeping info, including the three elements of bookkeeping that must be kept in balance, definitions of the balance sheet and income statement, and the differences between the four types of business structures.
This book includes some extras that wouldn’t fit between the covers, kind of like the Bonus Content on a DVD. Check out http://www.dummies.com/extras/bookkeepingaio to read articles on the most important accounts bookkeepers keep, ways to manage cash using your books, tips on reading financial reports, and signs that a company is in trouble.
Where to Go From Here
Feel free to start anywhere you like. You can use the table of contents or index to zoom in on any topic you’re particularly interested in.
If you need the basics or if you’re a little rusty and want to refresh your knowledge of bookkeeping, start with Book I. For the nuts and bolts of accounting and financial reports, drop into Book II. If you already know the basics and terminology of bookkeeping and are ready for some practical advice on day-to-day activities, you might start with Book III. If you’re heading toward the end of the year and need to start wrapping things up, check out Book IV. If you’re a manager, Book V was written with you in mind.
Wherever you begin, best of luck on your bookkeeping journey!
Book I
Keeping the Books
In this book …
✔ Learn the basics of bookkeeping, from keeping business records to managing daily finances
✔ Explore the Chart of Accounts that keeps a business financially organized
✔ Understand the ins and outs of the General Ledger and learn how to develop and post entries
✔ Discover how to simplify the journal process through your computer
✔ Control your records and protect your business’s cash in the process
✔ Find the right accounting software for you and your business
✔ Review the three key financial statements and understand the difference between profit and cash flow
Chapter 1
Basic Bookkeeping
In This Chapter
▶ Introducing bookkeeping
▶ Managing daily business finances
▶ Keeping business records
▶ Navigating the accounting cycle
▶ Choosing between cash-basis and accrual accounting
▶ Deciphering double-entry bookkeeping
This chapter provides an overview of a bookkeeper’s work. If you’re just starting a business, you may be your own bookkeeper for a while until you can afford to hire one, so think of this chapter as your to-do list.
All businesses need to keep track of their financial transactions – that’s why bookkeeping and bookkeepers are so important. Without accurate records, how can you tell whether your business is making a profit or taking a loss? This chapter also covers the key parts of bookkeeping by introducing you to the language of bookkeeping, familiarizing you with how bookkeepers manage the accounting cycle, and showing you how to understand the most difficult type of bookkeeping – double-entry bookkeeping.
Bookkeeping, the methodical way in which businesses track their financial transactions, is rooted in accounting. Accounting is the total structure of records and procedures used to record, classify, and report information about a business’s financial transactions. Bookkeeping involves the recording of that financial information into the accounting system while maintaining adherence to solid accounting principles.
Bookkeepers: The Record Keepers of the Business World
Bookkeepers are the ones who toil day in and day out to ensure that transactions are accurately recorded. Bookkeepers need to be very detail oriented and love to work with numbers because numbers and the accounts they go into are just about all these people see all day. A bookkeeper is not required to be a certified public accountant (CPA).
Many small business people who are just starting up their businesses initially serve as their own bookkeepers until the business is large enough to hire someone dedicated to keeping the books. Few small businesses have accountants on staff to check the books and prepare official financial reports; instead, they have bookkeepers on staff who serve as the outside accountants’ eyes and ears. Most businesses do seek an accountant with a CPA certification.
In many small businesses today, a bookkeeper enters the business transactions on a daily basis while working inside the company. At the end of each month or quarter, the bookkeeper sends summary reports to the accountant who then checks the transactions for accuracy and prepares financial statements.
In most cases, the accounting system is initially set up with the help of an accountant in order to be sure it uses solid accounting principles. That accountant periodically stops by the office and reviews the system to be sure transactions are being handled properly.
Delving into Bookkeeping Basics
If you don’t carefully plan your bookkeeping operation and figure out exactly how and what financial detail you want to track, you’ll have absolutely no way to measure the success (or failure, unfortunately) of your business efforts.
Bookkeeping, when done properly, gives you an excellent gauge of how well you’re doing financially. It also provides you with lots of information throughout the year so you can test the financial success of your business strategies and make course corrections early in the year if necessary to ensure that you reach your year-end profit goals.
