Basic Bookkeeping Strategies: Part 1

November 17, 2008 · Filed Under Bookkeeper, Bookkeeping, Bookkeeping Process, Bookkeeping Theory, Business Finances 

Bookkeeping involves the systematic process by which you gather and record financial data. This may appear very simple, but actually it can become a very complex process. The setup and management of your files will be determined by the level of expertise of the individual(s) involved. My goal through the next three articles is to share some of the basic steps in creating an effective system of bookkeeping.

Organize your data-why can’t I use the shoebox method?
The days of the shoe box method are long gone. With current technology trends, there really is no excuse for today’s business person to be disorganized. Simply put, your first responsibility is to make sure that all items are properly categorized. For example the major components of a business’s finances are assets, liabilities, revenue, and expenses. Keeping it very basic, I’ll explain each category:

Assets = what you own
Liabilities = what you owe
Revenue = what you’ve earned (income)
Expenses=what you’ve paid

Congratulations! You have just passed accounting 101.

Now in knowing this basic information, an effective bookkeeping system will make sure that all transactions are properly recorded in its appropriate category. Depending upon what type of system you use, before you begin entering any data; separate all your items into categories. You can use the above list as a guide. Most likely your source documents will consist of receipts, bank statements, check stubs, & invoices. This will save you time in advance to entering your data.

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