Introduction to Bookkeeping & QuickBooks
Those going into business for themselves need to have a basic understanding of bookkeeping and an introduction to QuickBooks if they plan to use this popular bookkeeping software. Owners who take time to set up their business's books correctly from the start have a better chance of being successful. Owners who neglect their business's books may be losing money faster than they are making it and not even know it.
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Bookkeeping
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The double entry bookkeeping system has roots as far back as the 1200s but has been what is considered "modern accounting" since the 1400s. The core principal behind the system is that each business transaction will affect two accounts, with one account being debited and the other credited. The accounting equation is kept in balance by use of the two accounts allowing Assets = Liabilities + Owners' Equity. For the new business owner, this means identifying the accounts that will be needed to track the transactions of his specific business. These accounts make up the business's "Chart of Accounts." The types of accounts are assets, liabilities, equity, income and expenses.
Recording Transactions
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Most transactions will involve the receiving or spending of cash. When cash is being spent, the cash account is the credit side of the double entry transaction. When cash is being received, the cash account is the debit side of the transaction. The second side of the transaction will depend on what the cash is spent on or received for. For instance, if a check is written to pay the office rent, the debit will be to "Rent Expense" and the credit will be to cash. If money is received from a customer for product sold, cash will be debited and "Sales" will be credited.
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QuickBooks
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QuickBooks is user-friendly bookkeeping software designed to walk the user through the stages of setting up her business books. QuickBooks offers many standard Chart of Accounts based on various industries for business owners to adopt and modify as needed. QuickBooks walks the user through setting up beginning balances in the accounts. After the file is set up, QuickBooks provides a familiar check register format for entering transactions involving cash.
QuickBooks Features
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QuickBooks allows for the creation of customer invoices and the ability to track and manage credit card balances, accounts receivable and accounts payable. QuickBooks also has the ability to run payroll checks and payroll reports with a subscription to their payroll service. The program comes with many different reports for management's use, including Accounts Receivable Aging, Income Statement, Profit by Job and Payroll Summary. These reports help owners keep on top of their business's operations and provide them vital feedback about the profitability of their business.
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