Double-Entry Bookkeeping

Most small businesses use a double-entry bookkeeping system for their accounting needs.  The two characteristics of double-entry bookkeeping are; that each account has two columns and that each transaction is located in two accounts. Two entries are made for each transaction – a debit in one account and a credit in another account.

An example of a double-entry transaction would be if the company wants to pay off a vendor (creditor).  The cash account would be reduced by the amount the company owes the creditor. That would be the debit. Then, using the double entry method we would reduce the amount the business now owes to the creditor account as it has received the amount of the credit the business is extending. That is the credit.  If you want to keep track of asset and liability accounts, you want to use double-entry bookkeeping instead of single entry. Other advantages that double-entry bookkeeping has over single-entry bookkeeping are that the owner can accurately calculate profit and loss in complex organizations, financial statements can be prepared directly from the books, and errors or fraud are easy to detect.

QuickBooks software provides a double entry system that enables your bookkeeper to track transactions and prepare month end and year end financial documents at a reasonable costs in a timely manner.  While QuickBooks has made it easier to enter transactions, it is still necessary to do the work.  This is where most businesses have trouble.  Usually they are to busy putting out fires or working on what makes them money.  And that makes sense!  But 2 or 3 months or more of non-entries starts to become a real problem.

Our suggestion:  find a reliable source to help you with your bookkeeping.  The cost is minimal compared to what the cost will be if it is not done correctly.

 

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