Bookkeeping records a business’s transactions so that owners and advisers can understand its financial activity. The choice of system should reflect the transactions, reporting needs and controls the business requires.
Single-entry records
A simple single-entry approach may resemble a record of money received and money paid. It can be easier to understand for a limited set of transactions, but it does not provide the same connected account structure as double-entry bookkeeping.
As receivables, payables, inventory and other balances become more important, a cash record alone may not provide enough information. Discuss the reporting and recordkeeping requirements with the person responsible for the accounts.
Double-entry bookkeeping
Double-entry bookkeeping records equal total debits and credits across the accounts affected by a transaction. The effect of a debit or credit depends on the account type. Supporting records should make it possible to trace entries and investigate a discrepancy.
For example, a business may need to connect a customer’s invoice, the amount owed and the later receipt of payment. The account structure and supporting records help maintain that history.
Review and reconciliation
Compare recorded transactions with the relevant source documents and reconcile accounts regularly. Investigate missing items or differences rather than assuming that a balanced report proves every entry is correct.
Accounting software can reduce repeated data entry, but accurate records still require correct configuration, reconciliation and review. Choose a method with an accountant based on the business and its reporting needs.