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The Importance of Bookkeeping Basics

2014-09-10 by Mark Harrington

Financial Planning and Review of Year End Reports

Say you’re starting a new business and want to know the first thing about finances. Well, a good place to start would be the basics of good bookkeeping. Proper bookkeeping ensures that you will collect, keep track of, save, spend and invest wisely. Some businesses will prefer to save money and do their own bookkeeping, but most business owners have not undergone money handling education like payroll training. Bookkeeping will usually be done by an accountant who you have hired and is certified following many an accounting course. The accountant will go through your sales and transactions, and analyze the data to let you know how well your business is doing, how much money is being made and whether or not there are errors or missing paperwork in your data. As an accountant working for a business, there are some basics you should know to ensure good bookkeeping for your client.

Organization

How will the financial transactions be filed? The entire accounting process consists of a fully organized system which information goes in and out of. It is a good idea to file all papers immediately after they are received, then again once they are entered in the system. To ensure there are no blunders in the numbers, make sure every little business expense is filed, as even a dollar or two can add up and make a difference. Although most accounting and payroll duties can now be accomplished with a computer, it is advisable to file and make back-up copies of receipts and important forms. The trick to organized books is to ensure you are easily able to reach files from months back, and that you are able to work as quickly as possible.

Filing Cabinet

Data Entry

Data entry will be one of the main jobs of a bookkeeper, particularly at larger companies. Incoming bills should be entered daily, along with any business credit card purchases. It is important to have accurate data in order to track how well your business is doing over time, and how much money is being gained and lost. Accurate data entry ensures your taxes are in order and business owners can make better informed investments with their money. Well-ordered data entry will also ensure that businesses can easily pull reports to see where finances stand at all times.

Ensure Your Bookkeeping is up to CRA Requirements

In order to avoid audits and further issues if there is an audit, keep your books up to the Canadian Revenue Agency standards. The following is a list of records which must be kept:

  • Spreadsheets and working papers
  • A business journal
  • Tax reports and records
  • Ledgers and journals
  • Any other documents that support your claims

Supporting documents should also be well-maintained and kept on hand. Here are some supporting documents a bookkeeper should have on hand:

  • All business purchase receipts
  • Legal and government correspondence
  • Deposit slips, cancelled cheques and bank statements
  • Sale invoices and receipts

Because bookkeeping is such an extensive and often time-consuming part of a business, more business owners smartly choose to hire an employee who has taken accountant training to balance their books, rather than take on the task themselves.

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