Understanding Bookkeeping

BOOKKEEPING is the only word in the English language with three sets of double letters in a row! This knowledge, along with everything you learn in this guide, will impress your friends and family.

So why do we keep hearing this long word BOOKKEEPING, coupled with the word ACCOUNTING, any time we are involved in a business activity?

Bookkeeping is commonly interpreted as a method to torture and anger micro business people and ultimately force then out of business. This rumor has persisted since double-entry bookkeeping was first published in Venice, Italy in 1494, although it dates back to 3600 B.C.

However, Webster’s Third New International Dictionary defines bookkeeping as “a branch of accounting that deals with the systematic classification, recording, and summarizing of business and financial transactions in books of account.”

The definition of accounting includes the definition of bookkeeping, plus “analyzing, verifying, and reporting the results.” The purpose of this guide is to expand the definitions of bookkeeping and accounting to: Show the forms needed to record basic financial information. Explain the individual steps to gather, record, classify, and summarize financial transactions. Show what your accountant does with the end result of a simple bookkeeping system.

Use of this guide should answer the questions that the author has heard many times. “How do I set up my books?” and “What do I need to give to my accountant for my tax return?” and “Why does my accountant ask me these questions!”

To help the user of this guide, many other aspects of business must be covered briefly and simply. Forms of business, payroll reports, financial statements, and income tax return information are included so the user can understand why they are doing what they are doing.

There are a number of other accounting procedures that must take place to complete your books for a specific accounting time period. These are not included in this guide as they are beyond the scope of basic bookkeeping. If you are interested in learning more, contact your State economic development department, small business development center, or your local community college. There are also many books on accounting available.

In addition, you should engage a Certified Public Accountant or an independent accountant even before starting your business. They will assist you with various tax and financial aspects of your new business.

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