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06-May-2021 By - team

Bookkeeping for beginners doesn’t need to be a headache. In this blog, we’ve listed six basic yet valuable concepts to help you get started – from how you can fill in your records, accessible bookkeeping practices you should know, some handy tips on learning bookkeeping at home, and so much more.

Don’t have an accounting degree or a bookkeeping qualification? No problem. Here are the basic concepts you can learn to get started right away to do the books like a pro.

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1. Where Do I Start?

The first concept to get you started as a beginner is to know how you’ll complete your records. Typically, there are three popular options:

  • Spreadsheets: They can be a good starting point to get you up and to run. Although they’re suitable for smaller businesses, you’ll find that it could be challenging maintaining them as your business grows, and human errors can creep in too.
  • Accounting Book: If you’re just keeping track of simple accounting records, then an accounting book can be the answer. 
  • Bookkeeping Software: You will have to use a bookkeeping app or desktop software. To make the process simpler, look for a solution that takes the confusion out of bookkeeping with easy-to-understand phrasing and the critical features you’ll need.

2. Bookkeeper vs. Accountant vs. DIY

As mentioned earlier, you don’t need formal degrees or qualifications for doing the books. Still, here are the main options available.

3. Basic Types of Bookkeeping You Should Know

There’s a little bit of learning involved that will make getting to grips with bookkeeping much easier in the long run. To help, we’ve listed the most basic types of bookkeeping you should know below.

  • Cash: The account where all business transactions pass. This is a critical account that bookkeepers often use two journals, cash receipts and cash disbursements, to track the activity.
  • Accounts Receivable: If your business sells products or services and doesn’t collect the money immediately, you have receivables. This account tracks the money due from customers. This needs to be kept up-to-date so you can send accurate and timely invoices.
  • Inventory: The account where you account for all of the products you have in stock. The numbers you have in your books should be tested by doing physical counts of inventory on hand.
  • Accounts Payable: The statement that allows you to see what money is leaving or has left the business – and when. This account gives you a clear view of everything you need to pay and makes sure that you don’t pay anyone twice.
  • Loans Payable: The account that tracks and breaks down everything you still owe and when payments are due for anything you’ve borrowed.
  • Sales: The account where you track all of your incoming revenue from sales transactions. This is another crucial account, as recording sales accurately and promptly helps to know where your business stands. 
  • Purchases: The account where you track any materials or goods that you have bought for your business. This is a critical component of calculating Costs of Goods Sold, which you subtract from Sales to find your business’s gross profit.
  • Payroll Expenses: The account where you track salaries and wages paid to your employees. This is often the highest cost of all for many businesses. Keeping this accurate is essential for meeting tax and other reporting requirements.
  • Retained Earnings: This account tracks any of your company’s profits reinvested in the business and aren’t paid out to the owners. The earnings here are cumulative, so they appear as a running total of money retained since the company started. It’s a good way of tracking how well your business has done over time.

4. Easy But Vital Bookkeeping Practices You Should Follow

For any beginner, bookkeeping can seem overwhelming, but it doesn’t need to be. You’ll start on the right foot by following these accessible yet vital bookkeeping practices.

  • Don’t Leave it Last Minute: Keep dates and deadlines in mind while creating reminders, so you’re not doing the books the night before. Do it earlier to avoid mistakes and spend less time looking for crucial information.
  • Keep Records Nice and Tidy: Cluttered records with endless bits of paper will make it a nightmare to do the books with valuable information all over the place. Keep them organised, so you know exactly what to look for without wasting time.
  • Store Your Receipts: If you store receipts through software, it means you’ll finally get that paperless office you’ve wanted. Everything is in one place, and if there’s ever an investigation, all of the information related to expenses will be available within your software or app via attachments. So, you’ll always be compliant.
  • Keep Business, and Personal Finances Separate: To help you do the books much faster, think about keeping your business and personal finances separate. So, you won’t need to look through personal information for business-related finances and vice versa.

5. The Basic Bookkeeping Terms You Need to Know

There’s no denying that there are new terms and phrases you’ll come across from balance sheets to income statements. In practice, they’re pretty easy to understand once the words are broken down into much simpler definitions.

Although we can’t possibly list them all here, here are five of the most popular bookkeeping terms you should understand.

  • Balance Sheet: A report which breaks down your business’ financial situation. It includes the assets, liabilities and capital of the company. Its purpose is to help show what your business owes and owns.
  • Chart of Accounts: A complete list of accounts used in your business to categorise financial transactions. This can include assets, liabilities, equity, income and more.
  • Expense: This is the fixed, variable, accrued or day-to-day costs that a business may incur through its operations.
  • Trial Balance: A business document where all ledgers are compiled into debit and credit columns. This is to make sure a company’s bookkeeping system is mathematically correct.
  • Profit and Loss: A financial report which shows the revenue and expenses over some time.

This is just scratching the surface. There are plenty of additional terms and phrases that will help you get started. You’ll benefit from bookmarking this glossary full of bookkeeping terms (no confusing jargon, though) that we’ll regularly update.

6. Useful Tips on Learning Bookkeeping at Home

You don’t need to search for the cheapest bookkeeper around to get started, even if you’re a complete newbie. You work hard for your money, so the last thing you want is to give a big chunk to the taxman and then another hefty slice to a bookkeeper for tasks you can do by yourself.

To get started, here are some valuable tips on how you can learn bookkeeping at home.

  • Get Familiar With Bookkeeping Terms and Phrases: Remember that glossary we told you to bookmark? Now is an excellent time to sit down, read and understand the terms and phrases. It’ll give you a better idea of what to expect and what things mean in bookkeeping.
  • Do Your Research: Look for resources online through Google and find some helpful blogs regularly updated to keep you in the know.
  • Use a Bookkeeping App: The best way to learn is to get hands-on in your own time and use a bookkeeping app that’s both easy to use and understand. No formal degrees, no qualifications. Just look for one that has valuable features you’ll need and not packed full of ones you’ll probably never use.

All of these are great place to start for any beginner. However, as simple as it might seem on paper, you must recognise when the beast becomes too big. When this is the case, you should know to pick the right time to hand things over to a professional.

Now that you have plenty of helpful information to get started as a beginner, it’s probably the perfect time to make the process even simpler by using your very own checklist…

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Do Bookkeeping the Right Way With a Bookkeeping Checklist

All of the points we’ve mentioned are all great basic ways to get you started, but there’s more to know about how to manage everything as you go along.

What the Dictionaries Say

Bookkeeping

The dictionary definition of bookkeeping is defined as “the skill or occupation of maintaining accurate records of business transactions.”

In simple terms, bookkeeping is recording and organising financial data.

Accounting

When it comes to accounting, the dictionary states accounting as “the skill or practice of maintaining and auditing accounts and preparing reports on the assets, liabilities etc. of a business.”

What is Bookkeeping?

A bookkeeper is someone who will accurately record the financial data of a business. The primary purpose is to ensure that every entry is correct daily while keeping a log of all the books’ transactions.

By doing this, a bookkeeper can record and calculate income and expenses, make bank transactions, create sales invoices and raise purchase invoices.

We’ve tried to make things super simple to understand. But if there’s ever any term you’re slightly unsure of, and you need a quick definition, then head over to and bookmark this glossary blog where we’re regularly adding bookkeeping and accounting terms.

Bookkeepers also make sure that the accounts of a business balance. They can explain crucial financial information to business owners and make these reports make sense based on this information.

Some other bookkeepers’ responsibilities include providing information in report formats, creating and updating daybooks, analysis reports and debtor reports.

What is Accounting?

On the other hand, accounts are mainly responsible for generally overseeing accounts and producing financial statements and tax returns that comply with the law.

Accountants need to have expert knowledge in financial laws and ethical issues as part of their role involves understanding data and providing financial advice that can affect a business.

There are different types of accountants – some that work for public accounting firms and handle multiple businesses, while others might just focus on one. An accountant will adjust the entries made by bookkeepers at the end of each financial period. They do this by preparing to change journal entries and produce documents like profit and loss and balance sheet reports.

After assessing the findings, accountants help businesses make informed decisions.

What Bookkeeping and Accounting Roles Typically Consist Of 

We can’t speak for every bookkeeper or accountant on the planet, but there are some typical duties that each role does, making them so different.

What’s important to know, though, is that some tasks bookkeepers and accountants do can vary between businesses. Especially in smaller firms, bookkeepers might do some essential accounting duties as there’s sometimes a bit of an overlap.

Typical Bookkeeping Duties

  • Processing and maintaining a payroll system.
  • Processing invoices.
  • They are preparing initial financial statements.
  • Processing receipts, payments and other financial transactions.
  • Recording business transactions.
  • Managing accounts receivable and accounts payable.
  • Processing expense claims.
  • Filing and document management.
  • They are chasing customers for payment.
  • Posting journal entries.
  • We are preparing and filing VAT returns.
  • We are providing essential tax advice.

Typical Accounting Duties

  • I am preparing to adjust entries.
  • We are preparing financial statements and reports.
  • I am completing income tax returns.
  • Financial analysis and strategy.
  • Tax strategy and tax planning.
  • Financial forecasting.
  • We are organising budgets.
  • I am analysing business performance.
  • Auditing
  • Financial management advice.
  • Prepare business plans and cash flow forecasts.

The roles of accountants and bookkeepers vary from business to business. However, now you know that although the two often confuse, they’re pretty different.

Even though it sounds like bookkeeping is a challenge, it’s pretty simple to do once you’re using digital software. That’s something you’re probably not going to be able to avoid when the Making Tax Digital deadline is here. Still, there’s software available that makes it easier than ever to manage your books and avoid the hassle of endless paperwork.

Take the Next Step to be Ready for Making Tax Digital

It’s completely normal to be curious about Making Tax Digital and have plenty of questions. If anything, it’s been introduced by the government to make everything much easier for you – but there’s still a lot more to know.

Guest post by : team Form -

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