Bookkeeping Basics

These practical bookkeeping basics are the key base of procedures every business needs to prevent failure - and avoid a messy meltdown by the owner!

From online blogs to local services, these steps will get you tracking income, expenses, profits and paperwork the right way.

Scroll down to read how basic bookkeeping procedures fit in with the day to day running of an office using the real life scenario of Tom and Mary.

Alternatively, click on the thumbnails below to go straight to a guide for each bookkeeping procedure.

Bookkeeping Basics for Small Business

Basics of Bookkeeping for Small Business

Tom Green had a knack for fixing things. Family and friends always called on him to come and repair things. Word soon got around about his talents and he had lots of requests. He made good money from this extra work so he left his full time job and started his own handy man business.

Tom knew that paperwork was not his strength so he persuaded his wife Mary to take care of the bookkeeping basics because paperwork was her strength.

Mary knew that she was going to need some assistance along the way to get the right systems into place.

Mary knew that she could rely on a really neat website called to guide her in the right direction...!

...and she read up on some important background information such as:-

Day to Day Procedures

The Office

Tom and Mary turned the spare room at home into an office.

Mary knew that having a well set up office would make a huge difference in feeling organised and calm. She purchased the correct bookkeeping and office supplies and set up an organised filing system to keep the piles of papers on the desk to a minimum, as well as keeping a computer filing system.

She investigated what software would be best for them to use.

Having an office at home meant that they could claim home office tax expenses at the end of the tax year so Mary kept a readily available folder of the ones that could be claimed.

Tom teased Mary a lot because she was quite a slow typist. However, she discovered that she could teach herself, for free off the internet, how to use the computer keyboard, particularly the numerical keypad at the following web address:

It wasn’t long before her fingers could fly over the keyboard, and entering all the financial data was a quick job, which meant Tom would have to find something else to tease her about...

Sales Invoices and Collecting What’s Owed

Bookkeeping Basics

With their new venture under way, the first thing Mary did was to give Tom a notebook so that he could record how much time he laboured for each customer.

There were materials Tom had to buy to complete his jobs such as nails and timber and paint.

Whenever Tom bought these items he wrote the name of the customer on the receipt/invoice so Mary knew which customer to on-charge the costs to.

As soon as Tom told Mary a job was complete Mary produced a sales invoice ensuring to include the markup prices on items Tom had purchased.

She printed the sales invoices, checked them carefully, and posted or emailed them out, placing copies into her organised filing system.

Sometimes, a customer would phone in and order parts only.

Mary would arrange for the parts to be delivered to the customer with a delivery docket.

A few days later, she would prepare the sales invoice and email it to the customer, and at the end of the month she would send a statement of account to them.

Mary kept a sharp eye on customer payments because she wanted to be sure to maintain efficient accounts receivable procedures...

...unfortunately, not every customer paid on time but Mary had a print out of accounts receivable collection tips which gave her some good pointers on how to go about the not so pleasant task of chasing down the money.

They were well on their way to getting a good grip on bookkeeping basics.

Bills and Expenses

Tom did not use the bank card to buy everything he needed to complete his jobs, neither did Mary when buying supplies for the office.

They opened a few trading accounts which they only had to pay at the end of the month. This meant that Mary had to understand Accounts Payable Procedures so they didn’t fall behind on payments.  

They also kept handy some small change for feeding to parking meters when they had to visit town, or for posting a letter when their stash of stamps ran out.

Mary got some cash from the bank, placed it in a locking cash box and set up a petty cash log.

The Bank Account

Tom and Mary opened a new bank account so as to keep their business and personal funds separate.

Mary compared the different types of bank accounts available before choosing one.

At the end of the month they received a bank statement showing all transactions for that month.

To ensure the bank account and cash book matched each other Mary performed a bank statement reconciliation... and from this she discovered that Tom was having a few too many coffee breaks at the local café which she was going to have to talk to him about...

The End of Bookkeeping Basics....?

The above systems are all essential to bookkeeping basics, but are not limited to these few.

From Mary’s excellent bookkeeping system, she was able to produce some interesting and eye opening reports to help them make important decisions for the growth of the business.

It wasn’t long before Tom was so busy that he had to employ an assistant, so Mary had to set up a payroll system.

It was just the beginning of a whole new way of life.... and they couldn’t have made it this far without practising excellent bookkeeping basics!

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Bookkeeping Basics


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