Part 1.1 What is bookkeeping?

The accounting foundation of any business lies in such a basic task as bookkeeping.

Bookkeeping is the process of recording daily financial transactions into a bookkeeping system. The way of recording transactions can be done either on paper or in a digital format. The most common software systems used for bookkeeping are Xero, QuickBooks and Sage. These online accounting software offer great tools to bookkeepers in entering data and keeping records organized. You can use trial versions to see which software works best for you in terms of software navigation, options they offer and of course pricing. Based on my experience, they all offer pretty much the same. If you are on a budget, there are great software for bookkeeping such as WaveApps or Pandle! Each software has sections on sales, purchases, receipts, bank and payroll (often as extra add-on). When you need to enter sale invoice, you will use sales section and simply enter the necessary information directly onto the template available, similar to purchases and receipts. These days it is completely safe to link a bank account on the software to the actual bank server, this allows bank transactions to feed through the bookkeeping bank section, thus minimizing manual work and mistakes. You can enter a bank account manually or upload with CSV files.

Payroll units make salary calculations and tax filings much easier than before, also minimizing any entering errors.

Why it is important to record on system.

The bookkeeping entries made ensure that funds earned as income or spent for business purposes are properly accounted for. Thus, every record that goes through our business account should find its match on the bookkeeping system of choice. Bookkeeper ensures that nothing gets missed or incorrectly recorded. When information is entered and reconciled (matched) correctly, then only there assurance of reliable and accurate financial data.

Another vital elements of bookkeeping is evidence, such invoices, receipts, bank statements, payroll records. This information can be kept as scanned files with a back up or organized in archive folders by year or month. This is important in case of tax questions or audit to keep the evidence for at least 5 years if sole-trader Business records if you’re self-employed: How long to keep your records – GOV.UK and at least 6 years if limited company (from the end of that period). Running a limited company: your responsibilities: Company and accounting records – GOV.UK

In the next section, you will learn about the bookkeepers’ role.