When you’re busy running a business, staying on top of your finances is rarely an easy task. But, with tax obligations and growth plans at stake, it’s vital you know the ins and outs of your financial situation, making comprehensive money management crucial. This is where double-entry bookkeeping in Crawley comes in, helping you maintain more accurate records of your transactions.
Not sure what double-entry bookkeeping is or how you can introduce it to your small business? Find out more in our easy-to-understand guide.
What Is Double-Entry Bookkeeping?
Double-entry bookkeeping works by recording every financial transaction in at least two accounts: debit and credit. So, for every debit entry, you should have a corresponding credit entry that balances your books. This essentially gives you two methods of ensuring all of your transactions are recorded correctly leading to fewer errors and easier identification of discrepancies.
For example, let’s say you purchase an item for your business. This would be recorded as an increase in your inventory or asset records, and a decrease in your cash account records.
How to Implement Double-Entry Bookkeeping
If you’re looking to simplify your business bookkeeping in Crawley, you can implement the double-entry system in a few, fairly simple steps. Let’s take a quick look at what you need to do:
- Constitute a Chart of Accounts: In this chart, you should add all the accounts operating under your business name, then categorise these accounts into assets, liability, equity, revenue and expenses. This will form the foundation of your transaction records.
- Record Transactions: Record every financial transaction within at least two relevant records. We also recommend that you include information to help identify individual transactions, including the date, the reason for debit or credit, the relevant bank account, and a quick summary of the transaction.
- Add to the General Ledger: All transactions recorded should also be added to your general ledger. This summarises your business transactions by account and is helpful when preparing financial statements.
- Prepare a trial balance: A trial balance is a report that includes the balances of all ledger accounts. It ensures that your debit account transactions match the business’s credit accounts. If there’s a discrepancy, you’ll be able to spot it now and look into the cause of the issue.
- Generate Financial Statements: Use your double-entry system to create balance sheets, income statements, and cash flow statements to summarise your business’s overall financial health.
Make Double-Entry Bookkeeping Easy
The simplest way to implement double-entry bookkeeping? Work with our team of professional bookkeepers and let us do the hard work for you. At Angel Bookkeeping and Payroll, we set up organised, efficient money management systems to make tracking and recording your financial transactions easier.
For double-entry bookkeeping in Crawley, get in touch with us today.