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Bookkeeping Essentials for Business Startups

Updated: Aug 2, 2023

Bookkeeping is the process of systematically recording, maintaining, and organizing financial transactions and records of a business. It involves keeping track of all the financial activities in a structured and accurate manner. The main goal is to create a complete and reliable record of the financial transactions of a business, which the business can use for financial reporting and decision-making purposes. Since bookkeeping is a day-to-day activity to ensure all of the finances are up to date, it may be a good idea to hire a professional bookkeeper to ensure accuracy and efficiency. These are some bookkeeping essentials for business startups to help ensure your success.


Important Accounting Terms to Understand


Debits & Credits

Debits and credits are essential to understand when performing bookkeeping activities, as they frequently appear on financial records. Debits are entries that increase the balance of asset accounts and dividends accounts and decrease the balance of expense accounts. They appear on the left-hand side of a journal while credits appear on the right. Credits are entries that increase the balance of liability accounts, revenue accounts, and equity accounts. Every transaction involves a debit and a credit account to keep the books balanced and accurate.


Journal

A journal is the record or logbook where all of the financial transactions are recorded. They are recorded in chronological order and the journal is the primary source of information for posting entries to the general ledger. Each entry in the journal should provide a detailed description of each transaction, including the date, the accounts that are involved, and the corresponding debit and credit accounts.


Ledger

A ledger is a collection of accounts that records and summarizes every financial transaction of a business. It serves as the central location for organizing and storing financial data. The ledger contains individual accounts which represent specific elements of the business’s financial position like the assets or liabilities. The ledger uses data from the journal to reflect the impact of each transaction on the appropriate accounts. Many ledgers are maintained electronically which ensures efficient data retrieval and easy data entry.


Bookkeeping Essentials for Business Startups

A startup business will need a business structure, a budget, a dedicated business bank account, and reliable bookkeeping to ensure a strong foundation. It’s a good idea to hire a professional for accounting and bookkeeping services to ensure efficiency and accurate information relating to financial transactions. Working with a professional takes a large burden off the new business, as you won’t have to constantly worry about keeping your books up to date. Bookkeepers deal with daily transactions, allowing you to focus on your business.

Accurate accounting and bookkeeping systems are essential for a business to thrive. Not only are they critical for following tax and accounting rules, but they also provide information that can help when making business decisions.


Weekly and Monthly Bookkeeping Tasks

It is bad practice to wait until tax season or even the end of the year to organize your books. Bookkeepers will categorize your transactions on a weekly basis and reconcile your bank accounts monthly.


Categorizing

A bookkeeper will access your business bank account to sift through your transactions. Each transaction will be put to a specific category. Some common categories are meal expenses, office supplies, vehicle expenses, payroll, and many more. On your business tax return, all your income and expenses will be broken down into these categories. Categorizing your business expenses is important for the health of your business.

It is important to note that as a business owner, you should be digitalizing and/or saving all your receipts for categorization and records.


Reconciling

As a business, your bank accounts must be reconciled monthly. Comparing your records with your bank’s records ensures that your business effectively secures its finances, preventing any potential loss of expenses or income. If the two records don’t match, you need to figure out why by looking at the transactions and making adjustments so that both records are the same. Reconciliation holds a crucial role in maintaining accurate bookkeeping standards.


BrightBooks is here to help. Contact us for bookkeeping assistance.

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