Basic Bookkeeping

Basic bookkeeping is firstly about obtaining, filing and organizing supporting financial paperwork in order that you can record transactions efficiently in your bookkeeping system.

Once you have the papers in place then take time out regularly to update your books. The more often you do this the more you will feel in control, and the more timely information you will have.

How often you need to do this really depends on your transaction volume. The more transactions you have the more effort you need to make to keep on top of tranasaction processing.

If you haven't read about how to organize your paperwork, read about it here in bookkeeping basics.

There are two basic bookkeeping transactions. Cash and non cash.

Every payment or receipt in or out of your business, whether through your bank account or in cash, no matter how small the transaction, must be recorded.

Non Cash Transactions

Credit Sales

Whether you sell products from an inventory (stock) or provide a service, if your customer has credit terms:

• Make a sales invoice when you despatch goods or provide the service. Record it on your accounts receivable ledger (sales ledger) in the customers account. Now send a copy to your customer so they can keep their books up to date.

• If you provided a physical product, include a despatch note for the customer with the delivery, and use a copy of the despatch note to help you update your inventory records. (Some bookkeeping software will take care of this process for you when you post the invoice to the customer's account).

Purchases on Credit

Having effective accounts payable procedures can really reward you many times over.

Where you buy products or services from a supplier where you have credit terms make sure you receive an invoice.

• Record it on your accounts payable ledger (purchase ledger).

• To make sure you don't pay for things you haven't received, match the delivery (or service signoff) note to the goods or service provided, and make sure you received what it says.

• Then match the delivery/service note to the invoice and make sure they match. At this point the volume of what is being charged has been confirmed.

• The only thing remaining is to ensure that the price charged corresponds with what you agreed.

Cash Transactions

Cash Receipts

• If the cash receipt is in respect of an invoice previously issued to a customer with credit terms, record the receipt against the sales invoice.

• With bookkeeping software this will update the bank/cash automatically.

• Mark the physical document as paid and refile it.

• If you make cash sales of products from an inventory, record it as a cash sale.

• Issue a receipt to the customer at the time of sale.

• Accounting software will automatically update the cash account and the inventory record.

• File the invoice as paid.

Cash Payments

• If the cash payment is in respect of an invoice received from a supplier who has granted you credit terms, record the payment against the purchase invoice.

• Bookkeeping software will update the bank/cash account.

• Mark your purchase invoice as paid and refile it.

• If the cash payment is for something you bought record the payment in your cash ledger, and itemize the expense (identify what it was for)

Performing these basic bookkeeping tasks on your accounting software means that you can now use the information to manage your business finances more effectively. Follow these Bookkeeping Tips to get the most out of your efforts.

Top of Basic Bookkeeping

More about bookkeeping:

Bookkeeping overview.

Bookkeeping Basics - Organizing the paperwork.

Introduction to Double Entry Bookkeeping.

History of Bookkeeping - a concise one.

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