Author: Felix
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How the Balance Sheet is Prepared
If you’re using bookkeeping software, then preparing the balance sheet is often as simple as the click of a button — but what if you’re doing things the old fashioned way? Bookkeeping with physical books, or even with spreadsheets is a different animal and requires a bit more patience. At the end of an accounting…
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The Chart of Accounts
There’s a lot of bookkeeping terminology out there. Debits, credits, depreciation, fixed assets, etc. It can be daunting to work through your own numbers, or to converse with a bookkeeping professional if you’re unsure of terms. For those who are a bit lost, I’ve started the category “Bookkeeping Terminology” for you to follow. Today, we’re…
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Why Bank Reconciliation is Important
The bookkeeper performs a bank reconciliation at the end of the accounting period (often the end of the month for high-traffic accounts). Why? What does a bank reconciliation accomplish? Throughout the course of a period, transactions are posted with money going in and out of the bank account. It may seem like, if the bookkeeper…
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What is Depreciation?
Some business expenditures are for high-cost items that will be useful to the business for many years to come. Those items are categorized as “fixed assets” and their expense is recognized gradually over the span of their lifetime. The process of recognizing an item’s expense over its useful life is called “depreciation” (or “amortization” for…
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What are Fixed Assets?
Businesses purchase many goods that are necessary to continue running or to improve the company in some way. The vast majority of these purchases are small expenses, such as office supplies, internet, utilities, rent, or marketing materials, etc. However, some necessary expenditures have a much higher dollar value and a much longer useful life, items…
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Debits and Credits
If you’ve overheard a bookkeeper or half listened to an accountant, chances are you’ve run across the terms “debit” and “credit.” What are they, and what do they mean for your books? A full discussion of history and etymology is outside the scope of this blog so I shall be brief. Debits and credits track…
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The Accounting Cycle, Part 4
Today we reach the final daily step for each individual transaction: recordation. Don’t get too excited, the accounting cycle is far from over, but many aspects of it take place at the end of the accounting period. Double-entry accounting dictates that each transaction be recorded in at least two accounts. Debits and credits need to…
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The Accounting Cycle, Part 3
The next step in the Accounting Cycle is determining which accounts are affected by the transaction. In order to record these transactions properly, the bookkeeper should be thoroughly familiar with that business’s chart of accounts. Transactions that are similar can affect different accounts. In Part 1, I mentioned that customer purchases made with cash or…
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The Accounting Cycle, Part 2
The next part of the Accounting Cycle is the gathering of documentation. This is often easier said than done, since the receipt isn’t the first thing on someone’s mind when making a purchase. However, documentation is crucial. An accounting transaction requires proof, or it has no place in the books. Source documents go beyond simple…
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The Accounting Cycle, Part 1
The first part of the Accounting Cycle is to collect accounting transactions and identify the events behind them. There are many events that cause an accounting transaction. These include but are not limited to: If money changes hands, or there is the promise of money changing hands at a later date, an event has occurred.…
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