Bookkeeping For Dummies book cover

Bookkeeping For Dummies

By: Lita Epstein Published: 12-31-2014

The fast and easy way to master the art of bookkeeping

If you're a business owner or an employee who manages finances, the latest edition of Bookkeeping For Dummies is for you. This handy guide gives you clear and concise information on how to keep track of accounts, prepare balance sheets, organize ledgers or journals, create financial statements, and so much more. Packed with the most up-to-date bookkeeping practices, tax information, and small-business laws, Bookkeeping For Dummies is an accessible, invaluable resource you'll turn to again and again.

Accurate and complete bookkeeping is crucial to any -business owner—but jumping in headfirst without knowing your accounts from your balance sheets can confuse even the most astute businessperson. That's where Bookkeeping For Dummies helps! Written in the familiar and friendly tone that has defined the For Dummies brand for more than twenty years, this clear and comprehensive guide covers everything you'll encounter as you set out to tackle your company's books, ensuring you're on the right track and saving you tons of headaches along the way. So what are you waiting for? It's time to hit the books!

  • Offers easy-to-follow instructions to keep track of your business' financial well-being
  • Covers managing assets and liabilities
  • Includes updated QuickBooks screenshots and Excel spreadsheets
  • Provides guidance on producing balance sheets and creating financial statements

Whether you're just starting out with bookkeeping—or a bookkeeper who needs to brush up on your skills—Bookkeeping For Dummies sets you up for success.

Articles From Bookkeeping For Dummies

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51 results
51 results
Bookkeeping For Dummies Cheat Sheet

Cheat Sheet / Updated 02-15-2022

Bookkeepers manage all the financial data for small companies. Accurate and complete financial bookkeeping is crucial to any business owner, as all of a company's functions depend on the bookkeeper’s accurate recording of financial transactions. Bookkeepers are generally entrusted with keeping the Chart of Accounts, the General Ledger, and the company journals, which give details about all financial transactions.

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Tips for Controlling Your Business Cash

Article / Updated 03-26-2016

Although bookkeepers are the ones who record what happens to your business’s cash, they aren’t the only ones who control where that cash goes. Controlling your company’s money is important; a business’s cash can be a pretty tempting siren for employees who aren’t accountable to the right checks and balances. Follow these suggestions to limit any one person’s access to your company’s money: Separate cash handlers. Be sure that the person who accepts cash isn’t also recording the transaction. Separate authorization responsibilities. Be sure that the person who authorizes a payment isn’t also signing the check or dispersing the cash. Separate the duties of your bookkeeping staff to ensure a good system of checks and balances. Don’t put too much trust in one person — unless it’s yourself. Separate operational responsibility (actual day-to-day transactions) from record-keeping responsibility (entering transactions in the books).

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Building Blocks of a Bookkeeping System

Article / Updated 03-26-2016

Your bookkeeping system is built on a few key elements fundamental to keeping your books in order. With these building blocks, any bookkeeper can set up a solid system for tracking all the business’s transactions. Here are these important components: Chart of Accounts: List of all accounts in the books; the road map of a business’s financial transactions Journals: Place in the books where transactions are first entered General Ledger: The book that summarizes all a business’s account transactions

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Calculating Cash Flow with the Current Ratio

Article / Updated 03-26-2016

In bookkeeping, the current ratio compares your current assets to your current liabilities. This ratio provides a quick glimpse of your company’s cash flow — its ability to pay its bills. The formula for calculating this important ratio is as follows: Current assets ÷ Current liabilities = Current ratio The following is an example of a current ratio calculation: $5,200 ÷ $2,200 = 2.36 (current ratio) The current ratio is one way lenders test your cash flow when they consider loaning you money. Lenders usually look for current ratios of 1.2 to 2, so any financial institution would consider this example’s current ratio of 2.36 to be a good sign. A current ratio under 1 is considered a danger sign because it indicates that the company doesn’t have enough cash to pay its current bills.

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Key Steps for Keeping the Books

Article / Updated 03-26-2016

Bookkeeping is, among other things, a step-by-step process that lets you methodically track the transactions in your company’s books. Monitoring a transaction every step of the way helps bookkeepers keep an eye on the bottom line at all times. Check out the following keys to bookkeeping success: Transactions: Make purchases or sales of items to run your business and start the process of bookkeeping. Journal entries: Enter transactions into the books through journals. Posting: Post journal entries to the General Ledger. Trial balance: Test accounts in the General Ledger to see whether they’re in balance. Worksheet: Enter on a worksheet any account adjustments needed after the trial balance. Adjusting journal entries: Post adjustments from the worksheet to affected accounts in the General Ledger. Financial statements: Prepare the balance sheet and income statement using the corrected account balances. Closing: Close the books for the Revenue and Expense accounts and start the entire cycle again with zero balances in both accounts.

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Testing Cash Flow with the Acid Test or Quick Ratio

Article / Updated 03-26-2016

In bookkeeping, the acid test or quick ratio evaluates your company’s current assets and liabilities, but it’s a stricter test of cash flow than the similar current ratio. Many lenders prefer the acid test ratio when deciding whether to give you a loan because of that strictness; it doesn’t include the inventory account in the calculation. Calculating the acid test ratio is a two-step process: Determine your quick assets. Cash + Accounts Receivable + Marketable Securities = Quick assets Calculate your quick ratio. Quick assets ÷ Current liabilities = Quick ratio The following is an example of an acid test ratio calculation: $2,000 + 1,000+ 1,000 = $4,000 (quick assets) $4,000 ÷ $2,200 = 1.8 (acid test ratio) Lenders consider a company with an acid test ratio around 1 to be in good condition. An acid test ratio less than 1 indicates that the company may have to sell some of its marketable securities or take on additional debt until it’s able to sell more of its inventory.

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Tracking Sales with Mobile Devices and Cash Sales

Article / Updated 03-26-2016

Have you gone into a store or restaurant lately and had your order handled with a tablet or other mobile device? That's the new trend in retail. Such systems help improve control over the tracking of sales and the management of cash as well as the collection of data that can be used to generate future marketing and promotions based on customer purchases. In the past, your server took your order on paper, brought it to the kitchen, and handed you a handwritten check at the end of the meal. Then there was a shift to computer ordering, where there were a few stations throughout the restaurant where the servers entered the order on the computers and a printout was generated for the kitchen. Bills were then calculated and printed at the end of the meal. That prevented a lot of errors in calculation and provided better information that could be used to plan future food ordering based on the most popular dishes. Today mobile devices have taken all this to a new level. There are restaurants where servers take orders on their smartphones right at the table and it is then printed out. Mobile devices are helping to speed up the order process, improve accountability for the sale of products, and track the cash that changes hands. There are restaurants that have kiosks at the table for paying the bill. When you're ready, you hit a button on the machine that says Pay Bill and you can swipe your credit and be done. If you do want to pay cash, you can ask for a written bill, and a server handles the cash transaction. Retail stores are catching up to the mobile age as well. Cashiers must scan every item purchased, which is then priced automatically by the cash register (if still being used) or the tablet or other mobile device used by the salesperson. This strengthens not only the tracking of what items are sold, but also the amount of cash and credit card receipts that should be in the cash register or cash drawer at the end of the day when proving out the day's receipts. Some retailers have even set up video cameras that automatically record all transactions at the checkout counters. If a problem is suspected, a manager can review the footage and determine whether someone is not following the cash-handling rules. Tracking and managing cash sales in retail environments are becoming easier and safer thanks to mobile devices. The information collected by mobile apps helps storeowners know quickly what items are popular and when they should reorder those items. They also can track what a customer purchases, collect that customer's email address, and enable a customer relationship program geared to what the store owner knows each customer likes to buy.

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Point of Sale Goes Mobile

Article / Updated 03-26-2016

Businesses used to have to spend thousands of dollars on expensive cash register systems connected to their computer systems in order to collect cash and adjust inventory at the time of sale. These are called point of sale programs. Just to give you a little background — in case you're not familiar with how point of sale programs and inventory management coexist — there are two ways to track inventory: One is the periodic method, and the second is the perpetual method. The periodic method requires you to periodically close down the store and count inventory. You've probably gone to a store that actually closes for a certain number of hours or even a day or more to count inventory. This is often done on a monthly basis. Some retail stores count daily or weekly. It all depends on the volume of the business. Companies using the perpetual method actually adjust inventory count each time a sale is made. They do this using computer software. Even if a company does use the perpetual method, it is a good idea to periodically check the true inventory count because of spoilage, breakage, or theft. Today, thanks to mobile devices and apps, a company can download a point of sale program to any mobile device and have the same controls for tracking sales and managing inventory. Many apps also include customer relationship management as well, to make marketing and promotions targeted to a customer's buying habits even easier. You can find an excellent review of ten systems at Software Advice. You do want to be certain that your point of sale program is compatible with your accounting system, so you don't end up with a major project inputting all the data from your point of sale program into your accounting system.

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Bookkeeping on the Go

Article / Updated 03-26-2016

Small business owners don't like to be tied to a desk. With today's new mobile applications for accounting, they no longer have to worry about finding time to sit down and do the books. Today, with the right accounting and bookkeeping software, a business owner can check his or her accounts online using mobile apps. Two companies currently provide excellent mobile applications and online account management: Quickbooks and Xero. These two also happen to offer international editions for business owners not based in the U.S. The mobile app from Quickbooks offers users online access anytime from anywhere. It provides automatic backup, so you don't need to worry about securing your critical accounting data. You can track your expenses and sales while you are on the go, so you don't need to worry about getting home from a business trip and spending hours on travel reports. And you can even create and send invoices while you're on the road and pay your bills while traveling. Xero, which was named by Forbes as the most innovative growth company in the world, is also a worthy option for your accounting needs. You can get up-to-date financials at any time using a Mac, Windows machine, tablet, or phone. Just as with Quickbooks online, you can access your accounting software from anywhere and invoice customers, records sales, track expenses, and pay your bills while on the road. If you do choose to use online accounting software, always be certain you are on a secure connection. Other mobile applications are available to secure your communications. You can check out some of the top rated mobile security applications at PC Magazine.

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Moving Toward Global Accounting Standards

Article / Updated 03-26-2016

Did you know that the United States is the only industrialized nation that does not require companies to use international accounting standards? The U.S. does have an established method of setting accounting rules. U.S. corporations must complete their financial reports based on the Generally Accepted Accounting Principles (GAAP), which are established by the Financial Accounting Standards Board (FASB). One may well wonder what happened to those standards over the past couple decades as more and more corporations were caught playing with the numbers. The collapse of Enron and Worldcom were two shocking examples of how corporations tried to get around these reporting rules. As more and more companies compete in the global environment, it becomes more important to have one global set of rules for financial reporting. The FASB is working with the International Accounting Standards Board (IASB) to converge the two systems, which you can read more about in the International Convergence of Accounting Standards Overview. Some critical differences between the two systems include the following: The GAAP (the U.S. system) provides detailed rules about when a transaction can be recognized as revenue. The International Financial Reporting Standards (IFRS) does not have the same strict rules. The GAAP does not allow assets to be revalued, but the IFRS does. This can make a huge difference on the balance sheet. For example, many U.S. companies must value their plants and buildings at original costs, even though after years of appreciation they may be worth a lot more. When comparing a U.S. company to a non-U.S. company, it can be difficult to evaluate the assets. The GAAP requires companies to expense research and development in the year that it occurred. The IFRS requires research to be expensed, but allows development costs to be capitalized and written off gradually over several years. This can create a significant difference in profits and make it harder to compare U.S. to non-U.S. companies.

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