Book keeping - What is it and how do i do it

Bookkeeping is the backbone of financial reporting. Poor or inadequate book keeping will result in misleading or inaccurate financial reporting. With this in mind it is important to ensure that you understand that good book keeping is essential to ensure the success of your business and finances.

Is the process of taking all your financial and business transactions for a fiscal year and recording them in a detailed format that will allow for compilation into financial statements, as well as corporate and / or personal tax returns.

Accrual Method:
Accrual accounting / bookkeeping means that items are recorded when an invoice is issued or received. This means that income is reportable even though the cash may not have been received, and expenses are deductible even though they may not have been paid.

Cash Method:
Cash Method book keeping means that income and expenses are only reported when the amounts are actually paid.

Choice of Method:
The CRA’s position is that accrual method should be used. However, cash method is acceptable so long as consistency is maintained. Once a method is chosen it should not be changed, and consistency must also be maintained between revenue and expenses.

How to do book keeping:
Book keeping can be done in a variety of ways. Computer programs like QuickBooks and Simply Accounting are good but require some accounting knowledge. You can also use a spreadsheet to record your income and expenses. Spreadsheets are good for simple business, but business that have lots of assets like equipment, and property should consider using the aforementioned software programs. Either way it is important to remember "gigo". Garbage in, garbage out. The more effort you put in the better the results will be.

Whichever method you choose it is important to remember the opening paragraph. Poor or inadequate book keeping will result in inaccurate reporting and tax preparation.