Businesses are similar and different in many ways. Although you can categorize many businesses as service or manufacturing oriented each business has specific information needs. This need for information is what makes up the foundation of a bookkeeping system. You have to capture all the transactions necessary to fulfill the informational needs of the business. The accounting system can be simple enough that you can use an excel spreadsheet or so complex that you have to spend thousands on an accounting system. The needs of a business are what will tell you what type of system you will need. A system must be simple and capture the information necessary for that particular business.
The first part of a bookkeeping system is understanding the type of business you are dealing with. For example, is the business so small enough that all you need is a spreadsheet?
Bookkeeping systems should at least capture enough information to file tax returns. A small sole proprietor may be so small and simple that all it may need is a spreadsheet to record its transactions. A good way to deal with this type of business is creating a system by taking IRS form schedule C and a spreadsheet. You would simply input all the types of income and expenses by row in a spreadsheet. You fill the top row of the spreadsheet with the dates the income and expenses took place. Essentially, you would have two journals an income and expense journal. Small single owner businesses that are small can use this idea, but other businesses more complex in size are going to need a sophisticated system.
To understand the type of system a business will need you have to research the needs of that business. What questions does the business need answered on a regular basis? What questions do outside regulatory entities need answered about the business on a regular basis? Are there other outside parties that need information about the business? These are just some of the questions you should be asking when creating a bookkeeping system.
Answering the questions above is just a small part of a system. Other factors come into play when creating one. A good bookkeeping system must have controls that will prevent errors. These errors can be intentional such as fraud or unintentional such as imputing the wrong balance in the wrong account.
Once your accounting system is setup you must test it to insure that it is working properly to capture and record information correctly. The business bookkeeping system may be one of the important columns holding up a business. This is because business owners make important decisions based on the information captured by the system. Creating one can be very simple or so complex that you need several people working on it.
The first part of a bookkeeping system is understanding the type of business you are dealing with. For example, is the business so small enough that all you need is a spreadsheet?
Bookkeeping systems should at least capture enough information to file tax returns. A small sole proprietor may be so small and simple that all it may need is a spreadsheet to record its transactions. A good way to deal with this type of business is creating a system by taking IRS form schedule C and a spreadsheet. You would simply input all the types of income and expenses by row in a spreadsheet. You fill the top row of the spreadsheet with the dates the income and expenses took place. Essentially, you would have two journals an income and expense journal. Small single owner businesses that are small can use this idea, but other businesses more complex in size are going to need a sophisticated system.
To understand the type of system a business will need you have to research the needs of that business. What questions does the business need answered on a regular basis? What questions do outside regulatory entities need answered about the business on a regular basis? Are there other outside parties that need information about the business? These are just some of the questions you should be asking when creating a bookkeeping system.
Answering the questions above is just a small part of a system. Other factors come into play when creating one. A good bookkeeping system must have controls that will prevent errors. These errors can be intentional such as fraud or unintentional such as imputing the wrong balance in the wrong account.
Once your accounting system is setup you must test it to insure that it is working properly to capture and record information correctly. The business bookkeeping system may be one of the important columns holding up a business. This is because business owners make important decisions based on the information captured by the system. Creating one can be very simple or so complex that you need several people working on it.
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