Bookkeeping Services

What is Bookkeeping?

Bookkeeping is the process of keeping track of a business’s financial transactions. These services include recording what money comes into and flows out of a business, such as payments from customers and payments made to vendors. While bookkeepers used to keep track of this information in physical books, much of the process is now done on digital software. It’s a skill used in both large companies and small businesses, and bookkeepers are needed in just about every business and industry. 

Types of Bookkeeping Services:

There are several types of bookkeeping that bookkeepers perform. Two of the most common are Single Entry Bookkeeping and Double Entry Bookkeeping.

• Single Entry Bookkeeping records all transactions in just one row. Typically, single entry bookkeeping is suitable for keeping track of cash, taxable income, and tax-deductible expenses.
• Double Entry Bookkeeping records all transactions twice, usually a debit and a credit entry. Typically, double entry bookkeeping uses accrual accounting for liabilities, equities, assets, expenses, and revenue.

While single entry bookkeeping is more simple, double entry is more thorough and less likely to produce errors.

What does a bookkeeper do?

The work of a bookkeeper may vary depending on the needs of the business. They may work at a large company, small business, or as a freelancer. Here are some other tasks they may handle as part of this job:

• Record transactions using accounting software, spreadsheets, and databases
• Collect and organize financial records, cash flow statements, bank documents, and loss statements
• Generate invoices and receive payments from customers
• Track debits and credits for various accounts
• Reconcile financial statements
• Create balance sheets and income statements
• Review reports for accuracy

10 basic types of bookkeeping accounts for a small business:

• Cash: It doesn’t get more basic than this. All your business transactions pass through the Cash account, which is so important that often bookkeepers actually use two journals, Cash Receipts, and Cash Disbursements, to track the activity.
• Accounts Receivable: If your company sells products or services and doesn’t collect payment immediately, you have “receivables,” or money due from customers. You must track Accounts Receivable and keep it up to date so that you send timely and accurate bills or invoices.
• Inventory: Unsold products are like money sitting on a shelf and must be carefully accounted for and tracked. The numbers in your books should be periodically tested by doing physical counts of inventory on hand.
• Accounts Payable: No one likes to send money out of the business, but a clear view of everything via your Accounts Payable makes it a little less painful. Concise bookkeeping helps assure timely payments and avoid paying someone twice! Paying bills early can also qualify your business for discounts.
• Loans Payable: If you’ve borrowed money to buy equipment, vehicles, furniture, or other items for your business, this account tracks payments and due dates.
• Sales: The Sales account tracks all incoming revenue from what you sell. Recording sales in a timely and accurate manner is critical to knowing where your business stands.
• Purchases: The Purchases Account tracks any raw materials or finished goods that you buy for your business. It’s a key component of calculating “Cost of Goods Sold” (COGS), which you subtract from Sales to find your company’s gross profit.
• Payroll Expenses: For many businesses, payroll expenses can be the biggest cost of all. Keeping this account accurate and up to date is essential for meeting tax and other government reporting requirements. Shirking those responsibilities will put you in serious hot water.
• Owners’ Equity: This account has a nice ring to it. Basically, it tracks the amount an owner (or owners) puts into the business. Also referred to as net assets, owners equity reflects the amount of money an owner has once liabilities are subtracted from assets.
• Retained Earnings: The Retained Earnings account tracks any company profits that are reinvested in the business and are not paid out to the owners. Retained earnings are cumulative, which means they appear as a running total of money that has been retained since the company started. Managing this account doesn’t take a lot of time and is important to investors and lenders who want to track how the company has performed over time.

Many business owners think bookkeeping is a dreaded chore, but if you understand and effectively use the data your bookkeeper collects, bookkeeping can be your best ally.

If you need help with your bookkeeping or just want to run your business more effectively, contact Molyet Bookkeeping & Accounting today!

Common Bookkeeping Definitions:

• Ledger: The place where business transactions are recorded and categorized.
• Accounts: The categories under which all business transactions fall.
• Assets: Things the business has bought and owns (or part-owns), inventory, and money owed to the business as accounts receivable.
• Liabilities: Amounts the business owes in unpaid bills, taxes, wages, or loans.
• Equity: Money introduced and withdrawn by the owner or shareholders.
• Revenue: Money coming into the business through sales, interest, or dividends.
• Expenses: Money paid out to keep the business running.
• Financial statements: Reports that shows the financial activities and performance of a business – two main ones are the balance sheet and profit and loss statement.
• Balance sheet: Lists the things your business owns and their value, plus the amounts your business owes.
• Income statement: Totals the revenue and expenses for a set period of time and demonstrates how the business is trending.
• Chart of accounts: A list of all the accounts you use to record financial transactions in your ledger. They’re also called general ledger codes.
• Journal entry: The name given to any record made in the account.

Article sources:

1. Coursera “What Is Bookkeeping? Duties, Pay, and How to Become One, https://www.coursera.org/articles/what-is-bookkeeping.” Accessed October 27, 2023.
2. Xero “Introduction to Bookkeeping, https://www.xero.com/us/guides/what-is-bookkeeping/introduction-to-bookkeeping/.” Accessed October 27, 2023.
3. Score “10 Bookkeeping Basics You Can’t Afford to Ignore, https://www.score.org/resource/article/10-bookkeeping-basics-you-can%E2%80%99t-afford-ignore?." Accessed October 27, 2023.

Frequently Asked Questions:

What is required from a bookkeeping client?

• For initial setup – the previous year’s tax return
• Monthly – All bank and credit card statements
• Monthly – List of inventories (if applicable)
• Monthly – Cash register end of day report for each day of the month (if applicable)

What will bookkeeping clients receive?

• Bookkeeping clients will receive monthly, quarterly, semi-annual, and annual financial statements. Monthly statements will be sent two weeks after all monthly information is received from client. These can be delivered digitally, by mail, or in-person depending on client preference and location.

How will bookkeeping clients send information needed?

• Bookkeeping clients can either mail information at the end of each month, send digitally, or allow Molyet Bookkeeping & Accounting access to view online account information.