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Every business needs someone to track the money coming in and going out. Whether you’re thinking about bookkeeping as a career or you need to manage the books for your own small business, this guide covers the core concepts you’ll need to understand.

Bookkeeping is the act of keeping a financial record of a company, institution, or individual. That financial record must be detailed, accurate, and up to date. Bookkeeping records are usually kept through an accounting program, depending on the needs of you or your clients. A few of these software programs are free, but most must be purchased.

As a bookkeeper, your job may look different depending on the size of the company and the type of work you do. In addition to keeping the accounts, a bookkeeper may also help a company run payroll, prepare for taxes, or manage other accounting tasks.

Double-Entry Bookkeeping

The most common form of bookkeeping is called a double-entry bookkeeping or double journal system. That means every transaction is recorded twice, once as a debit and once as a credit. For every debit entry, there is a credit entry. With double-entry bookkeeping, the reason for every financial transaction must be documented. This keeps accounts balanced and helps to maintain accuracy.

The most important part of bookkeeping is paying close attention to detail. You or your client’s financial records hold all the key factors to their success. When you use double-entry bookkeeping, you have a record of all the accounts and changes within them.

Five Key Terms of Bookkeeping

There are five key terms in bookkeeping that you will need to understand to be a successful bookkeeper.

• Assets are what give your company value. Cash and equipment your company owns are all considered assets.
• Liabilities are what your company owes money toward. Outstanding loans or recurring rent payments would be considered liabilities.
• Revenue is also known as income. It’s the amount of money the company receives through the sale of its goods or services.
• Expenses are the recurring costs you need to keep your business running. These can include staff salaries or equipment costs.
• Equity is the final piece of the bookkeeping equation. When you subtract the liabilities from the assets, you are left with the equity. Equity is any investment the owner makes in the company, as well as any profit or loss the company makes through the revenue minus expenses.

Using the information from the that list, you create what is called a general ledger. A general ledger is the master list of enntires made in all of the accounts of the company tha tmake up the finacial information you will use to make decisions, get reports, and take to your Accountant during tax season.

Bookkeeping can be a rewarding career choice, or it can help you manage your own business better. With the right bookkeeping training and the right software, you can be an expert in no time.