Whether you want to be a self-employed bookkeeper, do the bookkeeping for your small business, or be employed as a bookkeeper, this guide will point you in the right direction.
And it will not waste one minute of your valuable time. I want to stress that right at the start so you know that everything you see below is worth your time reading (please do sign up at the foot of this page to be notified as I expand and update this guide).
This guide is aimed at 3 groups of people:
There are many things shared in common with these three groups, so I will only point out differences where absolutely necessary.
For example, if you want to start a career as a bookkeeper, it's a good idea to know what sort of salary you can expect (if you're in the UK, the UK Government reckons it's about £17-£25k, and if you're in the USA, the last figure I have is $36k from the Bureau of Labor Statistics).
Whereas if you want to start your own bookkeeping business, you will also want to know what the current salary levels are in case you want to grow your business and take on qualified bookkeepers.
And if you want to learn bookkeeping as a business owner, then knowing what it would cost if you were to hire someone instead will help you make the decision of whether it is really worth your time.
On that last point, all businesses depend on marketing for survival. And marketing is all about time and budgets. If no budget is set for marketing a business (including bookkeeping businesses!) then it is very unlikely a new business will thrive.
Established businesses often get by with word of mouth marketing, but eventually they will decline as other rivals with a marketing plan and budget to match will move into their market.
And understanding what that budget might be just also happens to be a part of the bookkeepers set of skills. We'll get to that later on, but for now, you will be able to see just how important the work of a bookkeeper really is.
It's not just about adding up numbers and deciding where a particular transaction needs to be recorded in the books, it's all about knowing how much money in the business can be used in other areas that need it.
Since the bookkeeper is the one person with their finger on the financial pulse of the business at all times, the amount of power a good bookkeeper really has becomes apparent.
This skill set has been overlooked for years by the accountancy profession as a whole, and even more so by business leaders. This is because larger businesses rely on a financial director (usually a qualified accountant) who in turn relies on bookkeepers to come up with the figures.
So it's the bookkeepers who really know what's going on. Welcome to the Bookkeeping Industry.
I've written a 5 part mini series on this topic which you might like to bookmark for later over here (the link opens in a new tab).
Starting your own bookkeeping service is probably one of the safest lifetime businesses you can start.
The entire world is going freelance. The number of small businesses starting up is and has been increasing for a considerable amount of time, but right now it's increasing faster than ever because everyone known 'jobs are no longer for life'.
A university degree no longer has the benefits it used to have. In fact, the debt that university students get into whilst studying has never been higher. And that is a real burden not just on themselves but on the world's economy as a whole.
Learning bookkeeping has as a result become super important for any business owner, but since the last thing most business owners want to do is their own bookkeeping, it ends up being done by untrained volunteers (usually a family member), and that adds even more risk to the burden small business owners have to face.
And so it doesn't take long for them to realise they need professional help.
One answer to that is finding themselves an accountant. But the problem with that solution is the increased cost. Accountants train for years, and so expect a healthy return for all that training.
A bookkeeper can become quite competent in less than a year - even though it's the most important part of the finance side of all businesses.
This is because the tax legislation of every country far outweighs the amount of knowledge needed to operate a double-entry bookkeeping system.
There is one caveat to that: a bookkeeper must learn where transactions go in the books. They need to know the difference between a capital purchase and an expense.
They need to know the difference between selling a service and selling goods. They need to understand VAT (Europe and much of the rest of the world) and Sales Tax (USA).
But what they don't need to know are all the tax avoidance schemes and other forms of tax accounting that reduce or avoid the tax burden. That is strictly in the focus of accountants.
And here's the rub. The world's Inland Revenue services are changing fast. It is no longer publicly acceptable for large corporations to use tax avoidance schemes.
It's not just politicians who want to change things, it's the public as well. So it won't be long before the crackdown comes not just for all schemes, but also for smaller businesses too.
The good news, is that it falls right into the domain of the bookkeeper. A professional bookkeeper is there not just to enter the figures and make sure they go into the right boxes, they're there to protect business owners from making costly mistakes.
At some point in the future, the average business owner will not need an accountant at all. Governments and Inland Revenue Services around the world will make online submission so easy, and the rules so hard to break, anyone will be able to file their figures online without needing a complicated manual.
But the point is, those figures will still need to be generated in the first place, and the people most qualified to do that, are professionally trained bookkeepers.
As I say, it's one of the safest professions you can ever choose to enter, and more so now than at any other time.
Starting a bookkeeping business is just like any other business. You need to register with your Inland Revenue service to let them know.
You may also need to register with them for Anti Money Laundering supervision. This all depends on your country of course. In the UK, you can do this directly, or through a professional body such as the IAB - International Association of Bookkeepers (who also operate in 60 countries at the time of writing).
It will also help you gain trust by getting professional qualifications. The IAB can help in this respect too. They also cover distance learning as well as formal college courses.
You can start your business direct from home. There is no need to increase your costs by renting an office unless a) you can afford it, and b) you or your family has a problem with you working at home.
Another benefit of offering bookkeeping as a service is you will have very few other costs other than your time. Software comes into it, but these days you will find plenty of free software for micro business books, and fairly low cost solutions for small to medium size businesses.
You will also find the larger the business you target as potential clients, the more likely they are to want you to do your work on their premises. This has ups and downs, especially when it comes to charging for your work. They will want to pay you an hourly fee. Typical hourly charges for experienced bookkeepers in the UK vary from £20 to £35.
That rate is very similar for most countries but has to be pro-rated in for that countries economy.
If your clients are happy for you to work remotely on their account, then you can change to monthly or project charging.
Another vitally important part of any small business, but extremely important for professional services such as bookkeepers, is Professional Indemnity Insurance (PII). This will cover you should something bad happen to your clients and they end up suing you for some reason.
That brings us on to contracts and terms and conditions. Many bookkeepers take on clients without setting up any formal agreements. Don't do it. Even if your terms and conditions are simple, make sure you have some, and get a signature that they agree to them. In fact, the simpler the better.
This means setting up expectations around responsibilities. Make sure everyone involved understands who is responsible for what, and what to expect of each person BEFORE you start.
This will ensure that should you accidentally take on bad clients, you will find it very easy to exit without any impossible problems.
What are you going to call your new bookkeeping service? Names are always hard (every parent knows this only too well of course - and if this is your first business, it's going to feel a lot like your baby - you will get very precious about it, so the name matters).
The absolute simplest name to use is your own - but if you don't much like your name - or you want to remain anonymous, you can always use a made up name. It's what many of the most respected authors on the planet do - so you will be in good company (it's not weird - and you get the chance to give your baby bookkeeping service the name you always wanted).
Alternatively, you can go for a brand style name. I named my bookkeeping service AccountsCheap. I did it because the service helps micro businesses, and so is right at the bottom end of the market. My clients (mostly) cannot afford an expensive service, so their expectation is matched to our name.
And here's the thing about names - even the worse ones: the perception of the name happens slowly as you build your business. The meaning of the name will be built from the reputation you establish. In other words, names don't actually matter at all - it's your service that matters. This is why Google (a completely meaningless name) now has its own brand value and perception.
It's why Apple is more associated with a computer company than a fruit in business terms.
But avoid names that are hard to pronounce or misspellings of existing words. I founded a software company in 1999 and named it Accountz. Every time I picked up the phone and gave someone my email address I had to explain "that's accountz with a z not an s".
You can also use your town as the name if you want to stay local. My first choice of name was Wisbech Bookkeeping Services, which I did set up, and now that takes people to the AccountsCheap.com site.
I quickly got that site to No 1 in Google searches for local bookkeeping practices by putting up great content based on the fact it was a bookkeeping service and operated in my local area. You can do this too (or get help by joining SEOExpert.help - apologies if it's full when you get there, it's a popular course - just sign up to get notified when it next opens).
The first thing to do is get your site listed on Google for Business. This is fine whether you are working from home or an office. Search for 'Google my Business' and follow the instructions to get your business listed.
Next, put up a page with relevant content to not just your bookkeeping practice, but also your local town. Include images of local landmarks. This builds trust (even if you are a national service).
Then schedule in a series of pages, each devoted to the different areas your business covers (both geographically as well as from a services offered perspective).
If you offer accountancy services as well as bookkeeping services, make sure you mention that. And make sure that you use those keywords enough times to ensure Google and other search engines understand what you do. But VERY IMPORTANT, don't overuse those keywords. 2% is a safe maximum (that is, 2 in every hundred words can include those keywords).
What matters more than anything else, is the length of the articles you include. The longer the article, the more opportunities you have to influence search engines that the article is important to your industry.
Make sure you include HTML meta tags for the page title and description. This is what Google and other search engines are most likely to use when displaying your page in the search results - and of course, they are the first thing potential clients will read - so they matter more than anything else (this sort of thing is all covered in depth for complete beginners in SEOExpert.help).
The next part of The Definitive Guide To Bookkeeping will be published shortly.
Click below to receive updates.
A while back I was watching an episode of Dragons Den (Shark Tank in the USA) that reminded me of the confusion that abounds around the words: turnover, gross profit, net profit, profit margin, EBITDA and a bunch of other terms that have everything to do with how you view the profitability of a business.
Contestants on that show almost always fail when they get their numbers wrong (or worse - they don't know what they mean). But luckily it's easy. Read on...Find Out More About Our Certified Bookkeeping Course...
This is your total sales figure. Literally, in money terms, how much you sold during a particular period (usually your financial year). Add up every bit of money that comes into the business with the exception of Sales Tax/VAT, loans, sale of capital items, and interest received and that is your turnover.
The reason loans, capital items and other money is not included is because they are usually not a core part of a business. So whatever it is a business sells as a normal part of its trading activities represents its turnover.
Turnover To Date means the turnover so far this financial year. From this you can start to make a prediction of your total turnover for the year. For example, if you're 9 months into your year and your turnover to date is 75,000, then you can predict with some degree of certainty that your total turnover for the year will be 100,000.
If you have professional indemnity insurance you will need to have an idea of your forecast turnover for the current year. Most policies allow a degree of error of 50% (to make up for the uncertainty factor), but check your insurance small print.
Never confuse turnover with profit. Always quote turnover excluding VAT (or Sales Tax in the USA). If you quote turnover including tax, any potential investors will run a mile (they will see you as someone who likes to inflate figures). Sales Tax and VAT is not your money (you are just collecting it on behalf of the government) so it should never be included.
If all you sell is a service. And there are no costs directly involved in supplying that service, then your gross profit is the same as your turnover.
However, if you resell goods or services, manufacture things for resale or have costs directly involved with selling what you do, then you need to remove those costs from your sales in order to arrive at your gross profit.
Typically these costs will be held in an account called Cost of Goods Sold (aka COGS). If you sell mainly services, this is often shortened to simply Cost of Sales (COS).
Here's a simple example: You buy a widget at a cost of 100 and you resell it for 200. If you sell just one of these, your turnover will be 200. However, your gross profit will be 100 (because you must subtract the cost of the goods sold).
Other direct costs include shipping or postal costs (as these will not be incurred if nothing is sold). They will also include packaging of those goods, and if you manufacture them yourself, all the costs involved in that process (we know they are direct because unless you manufacture them, you won't have anything to sell, plus everything you manufacture is for resale).
Compare this to the costs of renting your office and heating and lighting it. You have to pay all those costs whether or not you sell a thing. These costs are termed overhead costs. Salaries and wages are also part of your overhead so are not included in your gross profit calculation. These items are included later to determine your net profit (see below).
Gross margin measures the gap between what it cost you to produce a product (or buy it for resale) and how much you got for it when you sold it.
Using the previous example, the gross margin is 50%. Gross Margin = (Selling Price less Cost Price) divided by Selling Price multiplied by 100.
As another example, if you sold a product for 200 which cost you 160 to buy or manufacture, your gross margin would be 20%. Here's the filled in gross margin equation of that last example: (200 - 80) / 200 * 100
Like gross profit, knowing your gross margin is vital. And that means knowing with a good deal of accuracy your cost of goods or cost of sales. If you don't know what it costs you to buy, manufacture and ship something, then you cannot set a price that you know will return a profit (and this is why so many contestants in Dragon's Den and Shark Tank get eaten alive!).
Markup is another way of talking about margin. If you buy a product for 100 and you resell it for 200, you have marked it up 100%. If you bought something for 100 and wanted to mark it up by 25%, the selling price would be 125.
Most retailers operate on a markup of at least 100%. The exception is for commodities where the competition is usually so fierce, everyone is forced to compete on price.
Certain luxury goods also have the same problem, but in a different way. For example, Apple sell both online and in retail stores. They fix their own prices and ensure those prices remain high everywhere by selling on goods to other retailers with only a small discount. Note that price fixing in any other way (eg. trying to force your resellers to sell at a certain price) is illegal in most countries.
Be warned. There are multiple versions of Net Profit. The bottom line is your turnover less all costs. Your costs are not only Cogs and overheads but also depreciation of your assets, any amortisation of loans and just as importantly the tax liability on any profit made.
Accountants use different abbreviations to show exactly what degree of profit they are reporting. The most common is EBITDA.
EBITDA is an acronym for Earnings Before Interest, Taxation, Depreciation and Amortisation. In other words your turnover less COGS, overheads and other expenses. EBITDA is the most common way to report Net Profit.
You can quote on any subset of this. For example: EBIT = Earnings Before Interest and Taxation (so here we are including depreciation and amortisation).
Learn the above and you will impress any investor (and bank manager).
NOTICE: If you haven't joined our 12 week online accounting course, please select the option below:Find Out More...
Depreciation is the amount an asset has reduced depending on age, wear and tear, and current market value. It is a core part of bookkeeping, and usually applied at year end (for larger businesses it is often calculated every month as part of management reporting).
When you record the purchase of an asset such as equipment or buildings for use in a business, you place it in the Fixed Asset section of your Chart of Accounts. Whenever you look at this section, you can see at a glance how much your assets originally cost.
However, in order to account correctly for your business, you need to record the change in value of those assets. This can be because the item is no longer new, and is therefore worth less than originally paid. It can also be due to wear and tear or damage.
On top of that, an asset could also be stolen, exchanged for another or simply sold. All of this needs recording.
It can be recorded directly in the asset's account itself, so a check on the transactions and the balance in that account will show its original value followed by its reduction in value over the years, or, more usually, a separate account will be opened to record those changes. This extra account is called an Accumulated Depreciation account (because the amount the asset reduces by over time is added together to give a total balance).
This continues until the Asset's account its corresponding depreciation account cancel each other out. Whilst the asset still has a value, we can look at the two accounts together to show the current value of the asset.
Usually, assets are classified into general groups (eg. Office Equipment, Motor Vehicles) to keep the number of accounts as small as necessary to accommodate reporting requirements for both the Inland Revenue and management.
Strictly, any asset should be valued at its actual market price when the depreciation needs to be reported. In reality, that can often be hard to do, so there are a few conventional ways to make this easier. The two most used forms of depreciation are:
Straight line means reducing the asset by a fixed value until the asset balance is zero. For example, at 25% per year, it will take 4 years to reduce the asset to zero. This is the most common way to depreciate assets.
A reducing balance means the asset never gets to zero. Using the same 25% rate, the reduction is applied to the last known value. So if an asset starts at 400, then after 1 year at 25% it will be worth 300. At this point it is the same as the Straight Line method. However, in year 2, it will be 25% of 300 (slightly less than 100 taken in year 1).
The reducing balance method is more accurate since it could be argued that whilst you still have the asset it will always have a value, however small.
Depreciation is a bookkeeping exercise. It has nothing to do with tax liability. Instead inland revenue services around the world offer tax benefits, an example of which is Capital Allowances (UK). You can choose to take the allowance or not depending on whether you have made a profit. That means the allowance will often be completely out of kilter with the book value.
From a business perspective, it is the book value that is important. It tells the business owner how much it would cost to replace those assets should it become necessary to do so.
There are 3 main sections in any set of books for any business. They are:
Assets is where we store the value of all equipment, vehicles or other purchases of substantial value that we intend to use in the business. Assets represent the things the business owns. Some of those things may be items we buy with the intention of selling them for a profit. This is our stock (also known as inventory). However, those are not the assets we use to report depreciation on.
Whilst they too (stock bought fo resale) decrease in value if they're not sold, they are accounted for in a slight different way, which will be covered in another article.
What we're interested in right now are those things the business buys that will last longer than 1 year and that are used either in the business, or to add value to the business.
Office Equipment is the most common, since this is one thing every business (that has an office) is likely to buy - even if it's on hire purchase or lease-buy type contracts.
If the business is the legal owner of that equipment (regardless of whether it has been paid of in full) then it will be recorded on the balance sheet as an asset, and it will also have a separate account created for it that shows by how much its value has decreased since it was purchased.
In other words we will be using 2 accounts in our bookkeeping system to record its total current value. For something like office equipment, these are usually called:
When we purchase office equipment we credit the bank (assuming that's how we paid for it) and we debit Office Equipment. If we value of our equipment was, say, 1000, then the balance of the Office Equipment account at that point in time would be 1000.
If we decided to depreciate office equipment using the straight line method by 25%, we would add a new transaction crediting Office Equipment Depreciation by 250 (1000 x 25%).
Since every credit must be balanced by a debit, the other side of this double entry would be a debit to Office Equipment Depreciation Expense. This will affect our profitability, which is what we want - the company has in effect lost 250 of its value during that period of time, which is now reflected in the P&L account.
To get the current value of our asset we add the balances of the 2 accounts together: 1000 - 250 = 750. We are saying that the value of that office equipment (were we to try to sell it at the time we depreciated it) would be 750. This is typically done at the end of each financial year.
In year 2, we would add the same depreciation transactions, and so the combined balances of the 2 accounts would drop to 500. In year 3 the balance would be 250. And in year 4 it would be zero.
That fall is also recorded in the profit and loss account as explained, which ultimately ends up in the Equity section of our balance sheet. The equity section represents what the business owes its owners, so if you're following along, you can see how that happens from the entries we have been making.
In reality that never happens because we will very likely have bought more office equipment in the meantime. Plus any equipment that has depreciated to zero (ie. that has been on the books for 4 or more years) will either have been thrown or given away, or sold.
The last thing we need to do to complete an asset that has no value in the books is to remove its original cost from, in this example, the Office Equipment account, and its total depreciation in the Office Equipment Depreciation account. We do that by crediting Office Equipment for the assets full value and debiting Office Equipment Depreciation by the same amount.
If an asset is sold, and the price we got for it is worth more than the book value (the 'book value' is literally the total balance in our books of the asset using those 2 accounts introduced earlier) then we must also report a gain. We have in effect made a profit on the sale of our assets. So that gain will be recorded in our profit and loss account under a new account named something like: "Gain On Sale Of Assets".
If we sold it at a loss, it would also be recorded in the profit and loss account, but this time in an account named something like: "Loss On Disposal Of Assets".
The other side of this transaction will debit the account that received the money from the sale (eg. a bank account).
And once that was done, we would then Credit Office Equipment and Debit Office Equipment Depreciation to zero out the value of the original asset and its total depreciation (leaving the rest of the Office Equipment assets and depreciation as they are to reflect the current values).
Suppose we bought an asset for 1000 with cash, depreciated it at the end of the year 1 by 250, and then sold it for 750 for cash. Since the value of the asset at the end of year 1 was 750, and we sold it at that point for 750, no loss or gain has been made. Here's all the transactions you would have made to account for everything including the original purchase:
If these were the only transactions in our bookkeeping system, we would have the following final balances in our 4 accounts:
Since the -250 cancels the +250 we know the books balance. And that is how it always must be.
In the UK and most countries in the world, you cannot claim capital purchases as a direct expense of the business. This is simply because assets like these usually last more than a year (so you still have the asset and it's still worth something, so you cannot write its full value off against tax - that's what it all boils down to - does the thing you bought still have some value and do you still own it at year end).
However, as it depreciates in value over time, you must still record that in your books - as explained above, and it would be wrong that you could not claim that depreciation against tax. But rather than doing the obvious - which is just to respect its value in the profit and loss account, governments over the years have chosen to make it a special case.
And so with a special case you need a special tax, and in the UK its called a Capital Allowance. None of this is recorded in your books. It's purely a tax thing, not a business value. As a result, if you make a loss one year, you won't want to claim the depreciation against tax - you can do that next year instead if you make a profit. Because of this discrepancy, your books can show one value for your assets, and the Inland Revenue another.
In the USA different names are used. As it's also complicated, take a look at the Wikipedia entry for it here.
If you want to know more about depreciation and capital allowances, join the Accounting for Everyone online bookkeeping course today:Find Out More...
From October 2016 the UK national minimum wage thresholds are as follows:
Most adult workers who:
In the UK, HMRC are introducing compulsory quarterly accounting periods for all businesses by 2020 (if you're in any other country and you don't already have this, be warned, it will be coming to a place near you soon - just as VAT will eventually replace Sales Tax in the USA - it's just a matter of time).
The new legislation means every 3 months you will need to know exactly where you are in your business from a financial perspective.
Anyone who keeps their accounts up to date will have no problem. But those (which is by far the majority now) will find it impossible.
And that's because they have no idea how to account for their business.
The upside for HMRC is that they will rake in a lot of penalties. The downside for us as business owners is they will have plenty more reasons to go after us.
So how can we learn to take responsibility for our finances as business owners?
And (more importantly!) why would we do that?
What's the benefit?
I drew up a list of 10 ideas to help:
The alternative is you find yourself a trained bookkeeper. The best international institution I know of is called The International Association of Bookkeepers.
In fact I respect them so much I joined and became a fellow. They are run by their members, so everyone gets a vote in what happens - including who is elected on the council.
You can find out more about the IAB here: http://iab.org.uk
If you're in the UK and want someone else to do your bookkeeping for you, they have a list of registered bookkeepers on their UK site.
That includes my own company right here: https://accountscheap.com
Of you can just learn and do it all yourself by joining the Accounting for Everyone online bookkeeping course. Link is on the right hand side.
I hope I will learn something from this having never been involved in anything like it before but hubby is setting up his own business and wants me to do the admin and book keeping and accounts so have to learn quick. So thank you for this, wish me luck think I'm going to need it.
Thank you so much for providing us such a wonderful platform for distance learning. I am so eager to attend for next session and I am so hungry to know where does the Equity group fit into.Thanks so much for this course, it has been so useful and engaging!!!
I completed the course a couple of months ago, and have just come back to get certified. I passed! Just a note that I’ve had real difficulties with the certificate – had to save the background image as a jpg then copy and paste the text and combine it all in Word. A pdf download would be so much easier!
Anyway, all sorted now, and thanks again. Thank you for this course I need it to brush up on my accounting skills. When you forget the basic you forget the most important part.Hi, I am currently working in a school as Acting Bursar and even though I have a strong finance background I do need to brush up my book keeping skills, I am so glad I came across this course as I feel this will help me immensely and also help boost my confidence in the long run.I’m really glad there is a course structure like this online – - I’m looking forward to learning and getting to work in the next 12 weeks. Will there be a certification given at the end of the 12 weeks?
Hi! I love this as it’s all coming back. Thank you for this free course as it’s a great refresher course. I wonder if you can help me understand and know where I go from here after the free 12 week course. I graduated with BS in Accountancy in the Philippines about 19 years ago. I never work in accounting in this country ever since I came here for family reasons and the thought that my qualification wasn’t recognized here. But at the moment, I’m really interested to work again while I’m helping my friend doing her bookkeeping. Is it really not recognized here? Do I have to study again to work in the accounting field?
Hi! The money will be under asset as cash in the bank, right! Then either way that is equity whatever kind of business but do you mean that if I have a limited company it will be shareholders account but a different account name if different kind of business? Thank you.
Hi! Looking forward to finish the whole 12 week course to hopefully refresh my knowledge in accounting and learn new or different terms e.g. From where I studied accounting, we used Capital instead of Equity. I really wanted to go back in this career but don’t know where to start. I suppose I have to start from the beginning as it was more than 19 years ago and from a different country. So, thank you for this free course.
Hello,I studied ACCA -Association of certified chartered accounting 6 years ago in Ireland and came to Canada after. couldn’t find same rate pay here so I left the career. I didn’t really study keepkeeping or payroll at all but I figure out it is not difficult to do it base on qualification,now I am bookkeeping my husband restaurant from last 2 and half years with excel sheet only without anybody help, except for search from google. I love the way you teach online and I will take few more weeks courses before I decide whether I will go for fast track. am I able to change by the end of course? do you have some payroll course too?
Enjoyed Lesson 1. It is so easy to follow. How do I register for the free week 2 .. Thanks
Ah, thank you for clarifying that… I was really scratching my head trying to work it out!
I’m really enjoying the course and am managing to follow all the explanations and tasks, but a small thing in this week’s lesson has confused me.
You said: ” The date will be the date you compiled this.” Wouldn’t the date for each transaction be the date it took place, rather than the date the accounts were written up? Hope you can clarify this for me, please.
Of course! Thank you for spelling it out for me! I’m enjoying the course so far, but am having trouble discerning Liabilities from Equity in some instances. Why is it that a mortgage is a Liability, but rent comes under PL and is therefore Equity? Surely repayments on a mortgage are part of PL too?
I’m able to understand working the problems and am getting them done without too much struggle. I’m having a terrible time understanding the instructions. When they say take last week’s P&L and add these two entries to it, I look for the P&L, look for the answers to see what it’s supposed to look like and it often doesn’t look like what we had (from what I’m finding, anyhow.) Then the new entries or last week’s data that we’re starting with will be above or below where I expect to see it. I know you can’t tell exactly what I’m talking about when I can’t tell you more precisely and I’m feeling so confused, I can’t explain it. I’m spending far more time trying to figure out the instructions than I am working the problems. The biggest problem seem to be when it refers to work already done. I find the use of the terms “Debtor” and “Creditor” extremely confusing because their use depends on which way the transaction is going.
Are we paying or receiving? I originally learned in my first classes in bookkeeping by using the terms “Accounts Receivable” and “Accounts Payable” and this was far easier to keep straight. If Debtors and Creditors are common industry use, we’ve got to use these terms. I’ve been looking for links or shortcuts to keep them straight but I’ve been wrestling with these terms for several days and still making as many errors in their use as when I started. Got any suggestions?
Many thanks for your reply, I can confirm I have now gone down the fast tract route and am now hooked, this course is great. thank you also for the link I shall have a look at that. I am really enjoying this course,
Can I confirm that I can switch to the fast tracked course if I wish. Also this is a new area for me and I was thinking , do you do other courses that continue on from this one to enable us to become fully qualified bookkeepers etc.Thanks for your encouragement and your answer.
Not following. I’ve been over the entries several times from where we balanced, let’s say the Sales Account. Balance was 2500. Then you added two additional entries, one for 100 and one for 40. But the original sales account had not had any additional entries made to it. But now it has a balance of 150. What changed the balance or is this a different account? Expense accounts had the same thing. I’m missing something.
Thank you for wanting to teach me about bookkeeping/accounting. I really do have a genuine love for accounting, and trying to seek a career in accounting. Right now I’m a college student majoring Business Administration starting out on my associates degree. As you can see, I’m moving in the right direction at this point. I do hope to get something out of your course.
Thanks for getting back to me so soon. I started this course on Monday and have already finished task for week 6. I find it really easy to understand but I’m now struggling to remember everything I have learnt so have to keep going through my notes. I got the last task correct but I think I need To go through this chapter once more to get my head round P&L and to practice a little more. Thanks again for your support and I am sure I will be asking some more questions in the next few days.
Could you please explain me the reasons behind transaction 5 on the task for last week? I did it the other way around: stationery a credit and accounts payable a debit. I understood it as coming from the stationery to accounts payable/creditors (credit – debit).
I got the final answer correct (4400 on both columns) but there was obviously a mistake. Is there a way I could pick this error when doing it for my business?First of all, thanks for introducing this System. I did Accounting far back in 1975 in which I took RSA (Royal Society of Arts) Stages 1 & 2 Bookkeeping and Accounting, but unfortunately never work with it. I’m at the moment a Truck Driver which involve a lot of physical. And due my age I wonder how long I’m going to hang in there, and therefore, need something to backup in case I’ve a change of profession. Once again I say thanks.
I looked for the answer and didn’t see it. May have missed. What is the difference between the b/d (brought down) and c/d (carried down)? I’m having a very hard time finding things: probably spend an hour looking for stuff for every 5 minutes I spend studying. Right now I’m looking for the workbook. I’ve already been in it several times but can’t find it now. Is there a map or some way to find things?I’m spending an hour looking for things for every 5 minutes I spend studying. Right now I’m looking for the workbook. I’ve been in it several times in the past, but now I’ve lost it again.
Is there a map or some structure to how these are arranged? OK, got it,
Thanks. I had not gotten to the workbook.I’m having a hard time getting the picture on this assignment. What is the data we are to work with? You say it’s at the beginning of this lesson and there are 5 answers.
Where are they? Where is the ledger we post to? We draw up a table. What does a table look like? This doesn’t look like what I’ve seen before? Please comment. Thanks.I do not reside in the UK, and my tax authority is US. I like your class it is very straight forward and precise. I am presently thinking about full time bookkeeping and wondered if the class is recognized by US jurisdictions?I just wanted to say how great this course was and how easy it was to learn with your explanations. However i have just paid for the test but it wont appear on my account for me to take it?
I’ve just started this course I’m a stay at home mum with 3 boys 3 and under and want to get a career under my belt before the youngest (23weeks) is in school (so I have a while yet) this is going to sound like a dumb question but I want to make sure I have the correct understand for task 1, I have the understanding that everything that either costs or pays is an account ie: groceries, nursery fees, rent, electric, work(wages) am I on the right line of understanding?
I seem to progress along through a task fine until it includes figures from the previous weeks then it all goes a bit pear shaped. I think the main problem is the continuation of the totals added to the P&L account, back to the drawing board!
I have been working as a bookkeeper for the last 6 years; I am taking your course now because I just want to make sure I’m not missing something, somewhere. I suppose I’m doing it more as an edification that I DO actually know what I’m doing and because I’m tired of losing jobs because I’m not a CPA (yet.)
In short, I’m doing this because #1) I want to go step by step, #2) I want to use it as a ‘refresher’ course, and #3) I want to learn! Thank you for offering this course. What happens if I want to go from free to option #3? Can I change horses in the middle of the stream easily? Please let me know.
Having looked at other books in an attempt to self teach myself this field, I’ve noticed that most textbooks tend to be intimidating by throwing all sorts of technical jargon at you (like “contra-accounts). without explaining their meaning or the reasoning behind it. Here in some very simple lessons you’ve managed to explain what 100?s of pages of reading only seemed to make even more confusing. I’m very glad that I’ve stumbled across your course and even if some of the rules might be slightly different here in the US, at the very least, you’ve given me a much clearer understanding of the principles and philosophies involved. Thank You.
Is there an easy way to remember which way the transaction goes when its ‘a sale on credit of 1500?? It’s these ones I keep getting the wrong way round Just what I needed all this years. Very Interesting. I am enjoying starting to learn about this but im not sure about how to do the task.. I dont suppose there is someone who can point me in the right direction? Do we just need the names of the accounts, or the actual lists. for example: for ‘Bank’ would the account be the bank statements? or everything that appears on the statements? Can you tell i have NEVER done this before haha
I have done some sort of bookkeeping for years at the various jobs I have held, and have used a few different software programs. It has been a long, long time since I took a basic accounting class in school, and I really want to have a working knowledge of what current bookkeeping software is doing, so that I can really be able to confirm the reports. All the calculations are no longer with paper and pencil, yet I do not like to just assume that the program is correct. Although, this is not a software class, per se, I will learn things that I have either forgotten or never really knew. And I will be able to understand what the reports are saying, and correct any errors. Thanks so much for this information.
I’ve just started working from home and I’m struggling to get my head around the bookkeeping I need to do. I’ve a young son so not a lot of time each week to spend learning a new skill on top of trying to keep the business going. I thought I had it worked out but then realised half the information I’d need for a tax return was missing from my files. I’m really hoping this course helps.
Thank you for this free information. I have actually done bookkeeping in an accountants office a few years ago, but I moved. I am now at a point in my life where I need to supplement my single income and have decided to do Freelance Bookkeeping in the evenings and on weekends. I am over half way through the Accounting/Bookkeeping Course with ICS Learning (on line/at home). I just need a little more confidence to get started. I am currently an Administrative Assistant (doing mainly accounts receivables and posting accounts payables. I think this is the just boost to give me more confidence as I know once I get that first job I will feel great. I know I can do the work. Right now I am only comfortable doing the A/R, A/P, Bank Recs and GST here in Alberta. I am able to print out and read the reports from Simply/Sage Accounting also. Thank you again. I know I will benefit. Trish
Is it only me that is still confused? Thank very much. your course is easy to understand and I am very glad that i have started.
No problem, i don’t think it was because I was clever, just that it confused me, and up to then, your course had been very understandable!
As the accounts mentioned were ‘Sales’ and Cash’ (which i used in my answer), your answer used ‘Sales’ and ‘Bank’.
I expect I haven’t fully got it, but as all the other answers, 2-5 (which i got right 🙂 used the same accounts as the question, I thought Task 1 should? Thank you for your quick replay.
I’m studying for an exam at the end of a bookkeeping module as part of an accountancy training (so this is only the beginning for me). Your course is very good, and I thank you very muck for it! I wanted some more information about the imprest system because I need to write about it (and my book doesn’t explain it very well) I was surprised I couldn’t find any mention of it. Another thing that I thought would be part of this is bank reconciliation … would be nice to have, even a short reference would do… or did I miss it? many thanks again!
This is a simple infographic from the International Association of Bookkeepers (IAB) explaining the benefits of becoming a bookkeeper.
Being a bookkeeper could be to learn the trade and gain employment in the industry, or to more fully and perhaps do the books for your business if you own one, or to set up your own bookkeeping business.
Whatever the reason you want to become a bookkeeper, the "Top Reasons to be a Bookkeeper" infographic below will give you plenty of ideas and insights into the profession, especially if you are new to the bookkeeping and accounting industry.
The IAB helps people gain professional qualifications in all aspects of bookkeeping including payroll and has branches in 60 countries around the world as well as distance learning opportunities and home study bookkeeping courses.
One of the most common accounting areas people want to know about is Accounting Ratios.
With just a little math you can quickly discover a lot about a business.
All you need is some basic statistics and figures such as turnover, sales and expenses tracked over time and you can figure out pretty much anything.
We have set up an Accounting Ratio page over here:
Also, another massive area of interest is our Accounting Glossary, which unusually is actually written so people can understand the terms. How good is that!
You can find that over here:
Finally, you may want to learn all about Double-Entry bookkeeping and how to understand Debits from Credits.
That is covered in great detail in the Accounting for Everyone Fast Track Online Course. Here's how to find out more:Accounting for Everyone Certified Course
Double-entry accounting is really very simple provided you follow these rules.
For a Transaction to be true to the double-entry principle, two further rules must be obeyed:
Furthermore, each entry must consist of a minimum of four pieces of information as follows:
1. Date (the date on which the transaction occurred)
2. Reference (so it can be identified with a source document)
3. Amount (known as a Debit or a Credit in any currency)
4. Account (whose balance will be increased or decreased by the amount depending on whether it is a Debit or a Credit)
Every transaction tracks an amount of money from one account to one or more other accounts.
As long as the Debit amounts equal the Credit amounts, then we know that all the money has been accounted for.
The idea that we are doubling the amount of data by making two entries is a myth.
The two (or more) entries merely record the flow of money from one account to another. That is its sole purpose.
It is called Double-entry because two entries are the minimum required to record the two accounts involved in every transaction.
For example, buying a computer for your business involves your Bank and your Equipment accounts.
Once the transaction has been entered, a look at your books will show how much you have left in your bank and how much you have spent on equipment.
If you don't know these things, it is unlikely your business will stay profitable as you will have no idea what is going on.
This is why double-entry accounting is used universally around the world and has been in existence for many thousands of years.
NOTE: If you want to learn more about double-entry, take an online exam and get a certificate to prove you know what you're talking about, consider joining the Accounting for Everyone Certified Online Bookkeeping Course. It is the longest running online course and has had well over 12,000 successful students.
All the above and more is explained step by step with tasks and answers in the Accounting for Everyone online certified bookkeeping course. Click below to find out more.Join The Accounting for Everyone Online Course
If you are new to bookkeeping and accounting then you should optin to the Accounting for Everyone 12 week online course.
Put together by Quentin Pain in 1998 the course has been available for many years and has recently been updated, although the principles of double-entry have not changed in 600 years.
But what has changed is the way you can think about the logic behind double-entry.
And that is what makes Accounting for Everyone so unique in the world of accounting and bookkeeping courses.
Here's some fundamentals you will want to remember if you ever get stuck either in day to day bookkeeping or if you find yourself taking an accounting exam.
Next time you try to figure out which is the credit and which the debit apply the From/To principle and you will get it.
For example, entering an expense of 100 for travel paid for in cash.
And let's look at the other side. Recording a sale of 500 paid into the bank.
The course has many brilliant snippets like this, so choose an option below and get started.[ez_box title="FastTrack+" color="orange"] Includes full FastTrack instant access plus online certification
The number of online accounting courses is quite limited, and of those not many are particularly good, but Accounting for Everyone is one of the diamonds in the pack.
It was put together from over 12 years of research into the double-entry model and how it can be explained in a logical way (and trust me, it is not easy to condense 1,000+ page hard to understand text books into something ordinary humans can grasp).
So in 1998 the first edition of the book that transformed double-entry hit the shelves of Amazon: Accounting for Everyone.
Now in its sixth edition, Accounting for Everyone has helped over 12,000 students get to grips with the fundamentals in a way no other course on accounting and bookkeeping ever has.
And you can now get the whole 12 week online Accounting for Everyone course for an extremely low cost.
When you finish, there is an optional Basic Bookkeeping Certificate online exam you can take to show other people you know the basics.
You get access to all the modules immediately as well as the downloadable PDF version of the workbook and access to the online exam.
This includes the following modules:
You get to access the whole course immediately, so you can work as fast or slow as you like.
Plus you also get a downloadable version of the course workbook (150+ pages) including all the question and answer grids that enhance the Accounting for Everyone course.
And on top of that you get full access to our online Basic Bookkeeping Certification exam.
You can take this as many times as you like until you pass (unlike other courses!), but if you go through every week diligently you will have no problem passing the exam.
We show you simple memory methods not explained anywhere else on how to remember how to cope with debits and credits and getting them in the right order.
This one simple method alone has helped literally thousands of people pass their bookkeeping and accountancy exams.
So all you need to do now is decide when you want to start.Find Out More...
Here's a great resource from Loris Tissino. He has developed a site to step you through double-entry including transactions and posting. I think you will find this another very useful tool.
Loris has written a piece for Accounting for Everyone describing it. Here we go:
If you are a student and want to practice bookkeeping and accounting, what can you do? If you look for explanations on the web, you'll find lots of tutorials that teach you the basic concepts, like what an account is, how double entry works, how to prepare a trial balance or a financial statement, and so on. That's fine, but what do you have to do to practice?
Probably you need to actually write down your journal entries, preparing a paper with some T-accounts, and manually copy the amounts from the journal to the T-accounts. To prepare the statements, you have to make dozens of (boring) sums, putting it all together in a nice paper.
If you are a bit more evoluted, you can open up a spreadsheet, and do your journal entries there. Some sorting, some filtering, some subtotals computing, and you are almost done. Better than using pen and paper, but a bit complicated, though (and things tend to get messy if you don't pay attention to some details).
Of course, you could use some software to accomplish your task. You can find programs that are actually used by companies to do the job. The problem with this approach is that these kind of programs are not much flexible (they don't have to). You cannot easily adapt the chart of accounts to your needs, you have to fill tons of information that are very important for the business' life but irrelevant for what concerns your exercise, and sometimes you cannot even edit what you have previously done.
If you are a student and faced this kind of problems, you'll be glad to know about a new web site aimed to allow you practice bookkeeping keeping everything easy. It's LearnDoubleEntry.org. The usage is completely free, and the source code is available as free software. The good news is that you don't have to install anything on your computer, since it is web-based. Just login, create a firm, and start bookkeeping. As you proceed, you can check the Ledger, the Trial Balance and the Financial Statement. If you make errors, you can easily correct them. You can have your transactions analysed, and you are warned if some of the results don't look normal (like having cash with a negative balance). You can use a standard chart of accounts or prepare a new one. You can share your firm with another student, so that you can work together. And you can send a link to your teacher, if you want him/her to check it.
For those with a passion for languages and internationalization, there is also the possibility to prepare a multilanguage chart of accounts. The application is under development, but already usable enough. Of course, it is open to improvements (you can help by sending comments and reporting bugs).
Depreciation is really important yet few bother to do it. Why? because it seems so hard to do.
But the reality is that it is really very simple.
But first we need to look at what it is, and why we need to do it.
Everything you buy to use for your business is an asset. However, over time your assets generally lose value. A computer becomes obsolete, your vehicle's mileage gets higher and higher and requires more and more spare parts. Something that you bought today, may be cheaper to buy a year from now.
There are many reasons of course. So why do we need to record the change in value to our assets? It is because we must always reflect a true picture of our business.
We may need to do that in order to get a loan, or to show our investors the value of the business as it stands today, or to value the business properly if we are going to sell it.
There is one more important thing about depreciation. It is a book value item. That is, it has NOTHING whatsoever to do with tax and limiting your liability for it. This is a common misconception.
Inland Revenue services around the world deal with asset depreciation and claiming that depreciation against tax in different ways, but the most common is by giving business owners an allowance.
When you record depreciation, you are doing so only in your books. Never ever think of depreciation as some form of allowance or tax mitigating transaction. You are simply recording what you (or some valuer) really believes the loss (or gain) in value of an asset really is.
This is a good thing. You want your books to reflect reality. In fact you are legally obliged to do so. Before we get into the transactions, here's one last reason why you must see depreciation and allowances as different things.
In many countries, if a business makes a loss, they can put off an allowance and carry it forward to a future year. So you can get the case where a business has bought, say, a computer for 500 and values it at the end of the year at 300 (if you bought a brand new computer today, how much could you sell it for tomorrow?).
The depreciation on that computer is 40% and that is what you must record in your books (don't worry the actual transactions are coming shortly). However, your Inland Revenue (IR) service may only let your claim a 25% allowance, so you can see that the balances will already be skewed. But that is how it should be.
A worse case is where you make a loss and decide not to claim that year. In your books the computer will be worth 300 but your IR service will still have it valued at 500. The following year you will depreciate it down to, say, 200 and because you make a profit you will want to claim your 25% allowance of... 500! which is 125.
So now your book value is 200 and the IR have it as 375. The bottom line is, unless you are a tax specialist or you are submitting your own tax returns, you need not be concerned with the IR valuation. You are only concerned with recording a true and fair picture of the value of your business.
Your chart of accounts should be set up with a group called 'Fixed Assets'. This is where you add accounts to hold the balance of assets you have bought. Each asset account should have a depreciation account associated with it. This will hold the accumulated depreciation of assets over the years (it is often called 'Accumulated Depreciation' for this reason).
To see the value of your assets, subtract the accumulated depreciation from the asset balance.
The reason for keeping both balances is so that you can see at a glance what your assets originally cost you (in case you need to replace them so you get a better idea of the investment needed).
There is one thing missing from this though. Where do we record the other side of the Accumulated Depreciation amount?
The answer is in the Profit and Loss account. You can set up a new group in there specially for it. Let's call the account This Year's Depreciation (or even P&L Depreciation to make it clear where it is going).
So make a journal Debiting This Year's Depreciation and Crediting Accumulated Depreciation.
That's it. That's all there is to it.
Using the technique taught in the Accounting for Everyone course, you are simple transferring an amount From Accumulated Depreciation To P&L Depreciation.
If you want to try this out, download the trial of Business Accountz available on Accountz.com and give it a go. Use the Green books ('transfers') to do this or use the traditional journal. Remember you can flip between From/To and Credit/Debit in the menu option Tools > Language (choose English - Accountant for the latter).
And if you haven't done so already, sign up below to start the Accounting for Everyone Online Certified Bookkeeping Course. We go into depreciation in greater detail on the course, including standard ways to depreciate such as straight line depreciation and reducing balance.[ez_box title="Start The Certified Accounting for Everyone Online Bookkeeping Course Today" color="orange"]Instant access to the whole course plus online certification plus 150 page downloadable workbook with answers [ez_btn color="grey" url="https://legendary.simplero.com/page/3887-accounting-for-everyone-fast-track" target="_self"]£29.99[/ez_btn][/ez_box]
The Legendary Business Owners Program is a new service from Small Business Mentor of the Year and founder of Accounting for Everyone, Quentin Pain.
Whilst only a few people ever qualify as being a well known celebrity, every business owner can become legendary for what they do either in their industry or in their locality.
That can happen in a number of ways including being featured in your local newspaper via press releases, guest articles or even advertising if you have the budget.
But Quentin's Legendary Business Owners program ads a massive amount more to this very basic idea.
It starts with mentoring and training, goes into the technical side of things (think internet here) and then goes on to creating your message and how to broadcast and market that super effectively.
The thing is, all of us are legendary in one way or another, it's just how we choose to use that that makes the difference between success and failure in business.
For a more detailed breakdown and contact details please visit Quentin's Legendary Business Owners page.
I have been passionate about accounting ever since I started my first business back in 1979 in the UK. It grew quickly and became successful, and I developed a computer program during that time to run the accounts of the business.
So here we are 33 years later and a LOT wiser, plus a few more successful businesses under my belt, but you know, the best thing about it all has been the businesses I have helped. And especially, the people who run those businesses.
2013 is going to be an incredible year for small businesses and those who want to become bookkeepers. So I would just like to wish you all a super journey and a really prosperous year in your ventures.
PS. If you want to learn a little more about marketing your business go and sign up at http://QuentinPain.com
Another year is upon us and at a time of world recession, you can not do better than being a bookkeeper. The number of new startup businesses is increasing globally because of redundancies and people unwilling to work for others.
The one thing they all have in common is that they don't want to learn or do bookkeeping. How do I know? Simple, I have trained tens of thousands of people since I first published 'Accounting For Everyone' in 1998, and this site is now in the top ten of bookkeeping tuition sites. yet out of a global population approaching 7 billion, only a very very small fraction are interested in the subject.
One of my missions has been to teach people how to make their businesses more successful through understanding accounting and I know from the feedback that it is greatly appreciated, but I also know that most businesses would prefer to pay someone for doing this task. And that is where you come in.
Now, how do you take advantage of this?
The simple answer is to understand marketing. I know from the many business owners I have talked to over the past 32 years that most spend less than 20% of their resources on marketing. And yet, statistics show that the most successful businesses spend upwards of 50%.
So the answer must be to either devote more time or spend more of your resources on marketing. The great thing about bookkeeping though is that once you have a full roster of clients (ie. enough to give you a full time business) then your marketing spend can come down considerably (unless of course your plans are to expand and take on additional bookkeepers).
This is great news for bookkeepers. But it means at the start you must get a grip on how to sell your business and yourself.
So let me introduce you to my other blog at QuentinPain.com. Everything I have ever learnt about running a business is being added to that site. Take a look and leave a comment if you can. I would love your feedback.
If you are not familiar with balance sheets you should take my bookkeeping course first as I don't want to put anyone off with this article. OK, with the warning out of the way, let's press on...
With most accounting systems, things like balance sheets are considered as reports. That is, something you need to compile on such and such a date. The same convention also applies to the profit and loss account etc. What very few people realise is that they can all be expressed as accounts. Radical thinking eh!
Balance Sheet as an Account
A balance sheet usually consists of three items:
It represents the accounting equation: Assets = Liabilities + Equity (or ALE to help you remember - imagine yourself drinking an ice cold beer on a hot summer's day whilst entering a journal or two).
The system of double-entry is based (at its simplest level) on two things:
Your debits must equal your credits for everything to balance, hence the name balance sheet. But wait a minute, we are looking at three things on most balance sheets (ALE). How does that work?
Hence the accounting equation shown above. This is also why a horizontal balance sheet only shows two sides (you wont see this pattern in a vertically oriented balance sheet).
Profit and Loss as an Account
Let's take a look at an extended Profit and Loss report:
It contains a whole bunch of account groups. But each group consists of accounts with either a debit or a credit balance. When you consolidate those accounts in each group you end up with either a debit or credit balance. Here we go:
The final balance of the Profit and Loss 'account' will be placed in the Equity section of the balance sheet. All your individual liability accounts will be summarised and placed into the Liability section, and all your assets (Bank, Cash, Debtors, Stock etc.) end up being summarised or consolidated into the Assets section.
The pattern is very simple and clear. Whether an account is some individual thing (like Stationery or Bank) or consists of a group of accounts (like Cost of Goods) you can look at them all as examples of 'accounts'. Go that one step further and consolidate their balances into balance sheet 'categories' and you can see the same pattern.
So the result is quite simply that a balance sheet and a profit and loss report is at its core just another account. That is why I talk about the first rule of accounting as 'everything is an account, and there are no special cases'. It is wonderfully elegant.
It's been an incredibly busy month here on Accounting for Everyone, with many wonderful new comments on the various weeks course material.
It took me many years to really understand double-entry. I did it by reading all the books I could get my hands on, and talking to thousands of business owners, oh, and the odd accountant here and there 😉
There are so many idiosyncrasies in the jargon of double-entry bookkeeping, and of course different countries are bound to use slightly different terms for the same thing. Let's take a look at a couple of those.
This is a great one. Journal = book = diary = log. I.e. a place to write something down. That's all. But it used most commonly to describe a specific type of transaction. That is where the confusion comes in. There are no 'special' transactions. In just the same way there are no special accounts. All a transaction does is move money around. Period. So a transaction consists of a number of 'entries'. Each entry affects one account. If an accountant or trained bookkeeper needs to make some correction, they say 'just journal it' (or something similar). This raises the 'journal' on a pedestal to some new height, but it is not like that. In short, you can 'journalise' everything and anything.
It is really understanding terms like this that will make you confident in bookkeeping, and that of course is where my bookkeeping course really hits the target (according to all the comments).
Another great one. In the UK we call it the 'nominal' ledger. Everywhere else it is called the 'general' ledger. What does it mean? Nothing. A ledger is where you place your accounts. That is all any ledger is. If you group all your customer accounts into one place, then you could name it your 'Sales Ledger'. If you are in the US you may want to call it 'Accounts Receivable'. Whatever you want to label it, they are all the same. A place to store accounts and look up their balances.
There are of course a number of different alternative names used around the world, but the most fundamental are covered in the course. What is important is that whatever something may be called, it does not differ in terms of how it is used in accounting and bookkeeping.
I just had to write a thank you note to all my loyal subscribers. Thank you so much for subscribing to Accounting for Everyone. Your comments have been fantastic, and the Facebook recommendations have also been overwhelming. Please do continue to recommend this course as I know it is helping a lot of people understand something that is core to the success of any business.
As global communication and information increases, so it empowers people to take action. This in turn not only drives economies, but gives people the responsibility needed to ensure their lives are, at the very least, interesting. By that I mean, running your own business or taking control of a particular area of a business. Of course, running a business does not necessarily make you immediately happy, but what it does do is give you the tools (and money) to achieve that end more easily.
I would like to find out what proportion of subscribers and visitors to this site are in business already, thinking of starting a business, wanting to help a friend, improving their career prospects, or are simply fascinated by double-entry. So please add your vote to the poll on the right (you can pick more than one answer if it applies). You can also see the results for yourself too.
Many business owners stick stubbornly to their policies, claiming that it confuses staff if you give them some room to talk more freely to customers. One of the things I found to win over customers is to listen. And I mean listen carefully. They are the ones with the problem, and for some reason they chose to contact you. That means:
So, if when they ring, you find yourself saying: “Er, no, we don’t do that”, then it’s time to learn that your marketing is sending the wrong message, or worse, you don’t really understand the problem you think you are solving (and without a problem to solve, there is usually no business). So, if you can change, do so, and start saying YES.
I am not a fan of Alan Sugar’s management, but as he once said: I am usually right, but when 10 people are telling you you are wrong, maybe they have a point.
WInning over customers is simple if you solve their problem.