| Bookkeeping is an important part of running your | | | | - The reason for the payment. |
| business. If you do not keep accurate records of your | | | | Ledger |
| business expenses, you will not be able to prove them | | | | The ledger is a document that summarizes all of the |
| and therefore claim deductions. An auditor may | | | | money that goes in and out of your business. You |
| disallow the deductions, burdening you with back taxes | | | | transfer information from your journals into the ledger. |
| and penalties. If you do not keeping accurate records, | | | | All of your transactions in the journals are then added |
| you cannot be sure exactly what your business | | | | and balanced at the end of the month. |
| expenses were for any given year and you can end | | | | Sales Record |
| up paying excessive taxes on your return. | | | | If you do not make an entry at the point of sale, you |
| The sample journal entries illustrate what information is | | | | should at least make record of all your sales on a daily |
| commonly written in an accounting ledger. | | | | basis. This will help you not only keep better records, |
| Basic Records | | | | but identify what is selling and what is not. |
| In any type of business, it is important to know how | | | | Accounts Receivable |
| much money is coming in and how much money is | | | | Accounts receivable are payments due to your |
| going out. Money coming into the business is revenues; | | | | company that you have not yet collected. For |
| money going out is expenses. | | | | example, if you sold an item or a service with payment |
| Cash Receipt Journal | | | | terms of 30, 60, or 90 days, then this transaction falls |
| This is the amount of money brought into the business. | | | | under your accounts receivable. You should register |
| This includes cash, checks, and your accounts | | | | the sale in your cash journal when the money is |
| receivable. For service firms, you should keep a journal | | | | actually received, not when the transaction took place. |
| at least on a weekly basis; for other types of firms, | | | | Receipts |
| you should update it daily. The number of times you | | | | The IRS expects you to be able to prove all of your |
| update your journal depends on how many | | | | deductions, so saving receipts or bank account |
| transactions take place in a day. If you have many | | | | information is crucial. If you are audited, you might be |
| transactions, it is better to update frequently for | | | | asked to produce this documentation years in the |
| greater manageability. Each journal entry should show: | | | | future. Make sure you create a good system for |
| - The date when the transaction occurred. | | | | archiving and retrieving those records. It is a good idea |
| - The name of the person or the institution that wrote | | | | to have an “in-box” where you can keep all |
| the check or paid in cash. | | | | your receipts, statements, bills, and other relevant |
| - The amount received by your company. | | | | papers. You or your bookkeeper will then sort through |
| - The reason for the payment. | | | | the material and put the right entry on the journals and |
| Cash Disbursement Journal | | | | ledgers. |
| This journal records monies you paid out to run your | | | | Record keeping |
| business; you should try to pay with checks whenever | | | | As you can see, this is tedious work, and it is better to |
| possible, as it is easier to keep track of your financial | | | | hire somebody to handle those records. If you want to |
| picture. In this journal you should record: | | | | tackle this yourself, however, then we recommend |
| - The date. | | | | purchasing a software package such as |
| - The check number. | | | | QuickBooks®, popular small-business accounting |
| - The name of the payee. | | | | software. |
| - The amount. | | | | |