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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Take the stress out of bookkeeping with this bestselling guide - written specifically for the Australian audience!
Warren Buffet has called accounting "the language of business" – the less well you speak it, the less likely you are to succeed. But there's no need to be intimidated: Bookkeeping for Dummies, 3rd Australian Edition is here to help make – and keep – you fluent. Whether you're a small business owner who's beginning to grapple with concepts and terminology, or a bookkeeping professional who wants to stay on track with the latest software or regulations, this bestseller will help you keep your business on the right side of the ledger.
Written in friendly, easy-to-follow style by leading financial tech author and instructor Veechi Curtis, this comprehensively updated guide has you covered: from the basics—understanding the lingo and recording income vs. expenses—all the way to Cloud accounting and conforming to the latest BAS legal requirements.
- Master the essentials, from recording transactions to processing payroll
- Choose and use the right software for your needs
- Allocate difficult-to-code transactions more easily
- Pass certified courses with flying colours
Whatever your needs, this Bookkeeping For Dummies, 3rd Australian Edition will keep you out of the red and ensure all your numbers add up flawlessly – every time.
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Veröffentlichungsjahr: 2020
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Bookkeeping For Dummies®
3rd Australian Edition published byJohn Wiley & Sons Australia, Ltd42 McDougall StreetMilton, Qld 4064www.dummies.com
Copyright © 2020 John Wiley & Sons Australia, Ltd
The moral rights of the author have been asserted.
ISBN: 978-0-730-38473-1
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Bookkeeping For Dummies®
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Table of Contents
Cover
Foreword
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Where to Go from Here
Part 1: First Steps
Chapter 1: Introducing the Bookkeeping Game
Understanding the Bookkeeping Life Cycle
Figuring How Often to Do the Deed
Staying on the Right Side of the Law
Developing an Attitude
Getting Skilled Up
Chapter 2: Creating a Framework
Putting Everything in Its Place
Classifying Accounts
Building Your Profit & Loss Accounts
Seeing Where the Money’s Made
Itemising Balance Sheet Accounts
Building a Final Chart of Accounts
Chapter 3: Going for the Big Equation
Matchmaking with Debits and Credits
Putting Theory into Practice
Playing the Double-Entry Game with Accounting Software
Choosing between Cash and Accrual
Part 2: Forming a Plan
Chapter 4: Playing a Bookkeeper’s Rhythm
Reporting for GST
Staying on Top of Payroll
Generating Reports
Devising a Record-keeping System
Developing a Bookkeeping Calendar
Chapter 5: Working with Accounting Software
Getting into Gear
Matching Software to the Job in Hand
Setting Up Accounting Software
Protecting Your Accounting Data
Chapter 6: Understanding GST
Coughing Up the Difference
Signing Up (Do You Have a Choice?)
Calculating GST
Figuring What’s Taxed and What’s Not
Understanding Tax Codes
Staying Out of Trouble
Dancing the Paperwork Polka
Part 3: Recording Day-to-Day Transactions
Chapter 7: Recording Expenses and Supplier Payments
Creating Order Out of Chaos
Working with a Micro Business
Recording Expenses for a Small Business
Bookkeeping for a Larger Business
Allocating Transactions
Nitpicking over Petty Cash and Out-of-Pocket Expenses
Chapter 8: Recording Receipts and Sales
Keeping Track of Sales and Payments
Working on a Cash Basis
Bookkeeping for Other Kinds of Income
Bringing Home the Bacon
Dealing with Tricky Situations
Making Sure Cash Doesn’t Go Astray
Chapter 9: Paying Employees
Staying Squeaky Clean
Hiring a New Employee
Checking Minimum Pay and Conditions
Getting to Pay Day
Taking Leave
Maintaining Proper Records
Chapter 10: Reconciling Accounts
Getting Started
Doing Your First Reconciliation
Keeping Proof that You’ve Done the Deed
Troubleshooting Tricks
Balancing Other Kinds of Accounts
Part 4: Pulling It All Together
Chapter 11: Reporting for Payroll
Paying Tax and Super
Ensuring You Pay the Right Amounts
Calculating Other Payroll Expenses
Finalising Pays at Year’s End
Reporting for Taxable Payments (TPAR)
Chapter 12: Managing Inventory and Other Assets
Buying In, Stocking Up and Selling Out
Organising Stocktakes
Balancing Your Inventory Account
Accounting for Assets
Depreciating Assets, One by One
Chapter 13: Mastering Tricky Situations
Recording Journal Entries
Plunging Into Debt
Working with Hire Purchase, Leases and Chattel Mortgages
Adjusting the Bottom Line
Bringing Income into Line
Chapter 14: Checking Your Work
Starting with the Bank Accounts
Spring Cleaning Your Debts
Putting GST under the Griller
Understanding Control Accounts
Doing a Mini-Audit
Chapter 15: Understanding Financial Reports
Telling the Story with Profit & Loss
Painting a Picture with the Balance Sheet
Understanding the Relationship between Profit and Cash
Putting Results under the Microscope
Chapter 16: Starting a New Financial Year
Finalising the Old Year
Sending Data to Your Accountant
Matching the Accountant’s Figures Against Your Own
Bridging the Communication Gap
Starting a New Year
Part 5: Running Your Own Bookkeeping Business
Chapter 17: Starting Up On Your Own
Deciding Whether You’re Ready
Thinking through the Practicalities
Launching Your New Business
Building a Successful Business
Chapter 18: Staying on the Right Side of the Law
Becoming a BAS Agent
Acting Honestly and Independently
Making Sure Information Is Correct
Setting Up Systems
Part 6: The Part of Tens
Chapter 19: Ten Tips for Not-for-Profit Organisations
Know and Love Your Cost Centres
Become the Budget Queen
Get the Terminology Right
Report to the Board
Get Help with Payroll
Do Killer Grant Reporting
Be Accountable at All Times
Make Sure You Can Survive an Audit
Track Membership Dues with Care
Know When to use Trust Accounts
Chapter 20: Ten Tricks for Collecting Money
Draw Up a Credit Policy
Do Your Homework
Don’t Waste a Moment
Calculate the Cost of Debts
Get on the Blower
Don’t Give Too Many Options
Keep a Dossier
Track ’em Down
Stick to the Law
Get Drastic
Chapter 21: Ten Tips for Doing Your Books in the Shortest Possible Time
Get Connected with Bank Feeds
Create Bank Rules to Allocate Transactions Automatically
Scan Receipts
Create Recurring Transactions
Integrate Everything
Keep Personal Stuff Separate
Learn to Use all Ten Fingers
Set Up Your Accounting Software Properly
Ditch Paper Records
Make Customer Payments Easy
Glossary
Index
About the Author
Connect with Dummies
End User License Agreement
List of Tables
Chapter 3
TABLE 3-1 Debits and Credits in Action
Chapter 6
TABLE 6-1 Basic Tax Codes, Simpler BAS Method
TABLE 6-2 Additional Tax Codes, Full Reporting Method
Chapter 7
TABLE 7-1 Matchmaking Payments and Accounts
Chapter 8
TABLE 8-1 Matchmaking Receipts and Accounts
Chapter 9
TABLE 9-1 When You Have to Pay Super (and When You Don’t)
TABLE 9-2 Calculating Leave Entitlements
TABLE 9-3 Converting Leave Entitlements to Hours Accrued per Week
Chapter 12
TABLE 12-1 Claiming Depreciation Using the Prime Cost (Straight-Line) Method
TABLE 12-2 Claiming Depreciation Using the Diminishing Value Method
Chapter 17
TABLE 17-1 Calculating Maximum Billable Hours per Year
List of Illustrations
Chapter 2
FIGURE 2-1: A cash disbursements ledger created in Excel.
FIGURE 2-2: An account transaction listing in Xero.
FIGURE 2-3: Accounting for cost centres by classifying transactions in several ...
FIGURE 2-4: Some of the accounts that form part of a final chart of accounts, r...
Chapter 3
FIGURE 3-1: A journal entry includes a column for debits on the left, and a col...
FIGURE 3-2: Recording a general journal entry for a new loan.
FIGURE 3-3: Two journal entries — one showing a sale, the other showing a payme...
FIGURE 3-4: The journal entry behind the payment of a telephone account.
FIGURE 3-5: Recording a journal entry for a sale of a stock item.
FIGURE 3-6: Journal entries showing GST in sales and purchase transactions.
FIGURE 3-7: The debits and credits behind receiving a supplier bill.
FIGURE 3-8: The debits and credits behind paying a supplier bill.
Chapter 4
FIGURE 4-1: Review reports regularly to find out how much GST you owe.
Chapter 6
FIGURE 6-1: Calculate the difference between GST collected on sales and GST pai...
FIGURE 6-2: Configure your chart of accounts so that each account corresponds t...
FIGURE 6-3: Apportioning personal expenses.
Chapter 7
FIGURE 7-1: Possible bookkeeping processes for a micro business.
FIGURE 7-2: An example bank statement.
FIGURE 7-3: This screen shows how the transactions from Figure 7-2 would appear...
FIGURE 7-4: Entering transactions one by one into the Bank Register window of M...
FIGURE 7-5: Entering transactions in a spreadsheet.
FIGURE 7-6: Bookkeeping processes for small business.
FIGURE 7-7: Seeing how much you owe.
FIGURE 7-8: The bookkeeping process becomes more complex as a business grows.
FIGURE 7-9: Recording expenditure from the petty cash tin.
FIGURE 7-10: Recording a journal entry for petty cash expenses paid using owner...
Chapter 8
FIGURE 8-1: Make sure invoices include all the information everyone needs.
FIGURE 8-2: Simple cash-based accounting works well in many situations.
FIGURE 8-3: A simple receipts journal created using Excel.
FIGURE 8-4: If you prefer, you can use a single spreadsheet to track receipts a...
FIGURE 8-5: An Aged Receivables report shows how much customers owe you.
Chapter 9
FIGURE 9-1: Taking on a new employee? Your payroll checklist.
FIGURE 9-2: If the feature exists, try using the timesheets feature in your acc...
FIGURE 9-3: Make sure you include enough detail on every pay slip.
Chapter 10
FIGURE 10-1: Getting ready to reconcile accounts using QuickBooks Online.
FIGURE 10-2: A Bank Reconciliation Summary from Xero.
Chapter 11
FIGURE 11-1: Every pay transaction usually involves several debits and credits.
FIGURE 11-2: A payroll liability account tracks how much you owe.
FIGURE 11-3: Reconciling payroll liabilities can be awkward, but feels good whe...
FIGURE 11-4: A typical end-of-year payroll report summarising key information.
Chapter 12
FIGURE 12-1: Recording the purchase of inventory items.
FIGURE 12-2: When you use accounting software to record inventory purchases, th...
FIGURE 12-3: The debits and credits behind the sale of 10 haggis.
FIGURE 12-4: Trading Statements come in two possible formats.
FIGURE 12-5: Different costing methods result in very different inventory valua...
FIGURE 12-6: Recording a new asset purchase.
FIGURE 12-7: Recording the gain or loss on the sale of an asset.
FIGURE 12-8: Recording a journal for depreciation.
Chapter 13
FIGURE 13-1: Purchasing a new vehicle via a bank loan.
FIGURE 13-2: Recording interest charged against bank loans.
FIGURE 13-3: A typical summary from a hire purchase document.
FIGURE 13-4: A journal entry showing the purchase of an asset using hire purcha...
FIGURE 13-5: Adjusting for expenses that have been paid in advance.
FIGURE 13-6: Making an accrual for expenses.
FIGURE 13-7: Making journals for leave provisions.
FIGURE 13-8: Adjusting expenses to allow for personal usage.
FIGURE 13-9: Matching income to the period when it is earned.
FIGURE 13-10: Recording a dividend and imputation credits.
Chapter 14
FIGURE 14-1: Engage the brain and look through Aged Payables reports with a cri...
FIGURE 14-2: Review GST codings for every transaction.
FIGURE 14-3: Reconciling GST on a cash basis when you have separate GST liabili...
FIGURE 14-4: Reconciling GST on a cash basis when you have combined GST liabili...
FIGURE 14-5: The Reconciliation Summary report in MYOB compares receivables aga...
Chapter 15
FIGURE 15-1: A typical Profit & Loss report.
FIGURE 15-2: A Balance Sheet provides a snapshot showing the assets and liabili...
FIGURE 15-3: A Statement of Cashflow explains the difference between profitabil...
FIGURE 15-4: Compare this year against last year as part of checking your work.
Chapter 16
FIGURE 16-1: Recording a journal entry to align your Balance Sheet with your ac...
Guide
Cover
Table of Contents
Begin Reading
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Foreword
While reviewing this edition of Bookkeeping For Dummies, I have once again been impressed with how well Veechi has captured the essence of bookkeeping in today’s world. While some say bookkeeping doesn’t change, what is very obvious (and what Veechi takes care to explain within these pages) is that new technology and changing government regulations constantly drive change in bookkeeping methodologies and practices.
Bookkeeping For Dummies is a must-read, whether you’re considering doing the books for your own business, as an employee or whether you’re considering bookkeeping as a career. The combination of step-by-step explanations, background information, tips and warnings will help you gain a rapid and accurate understanding of all requirements. Veechi not only explains the basics, introducing essential bookkeeping concepts, but also embraces more complex and advanced bookkeeping topics, including the latest on the rules and regulations involved with working as a BAS Agent.
I first met Veechi Curtis more than fifteen years ago at an MYOB accounting software conference. I was the technical presenter and Veechi was there in her capacity as a bestselling author of numerous accounting software and small business titles. Since then — many years, many conferences and many chats later — it has become obvious to me that Veechi has a passion for sharing her knowledge about bookkeeping and small business in a creative and committed way that always sheds new light on the topics.
I helped found the Institute of Certified Bookkeepers (ICB) in Australia in 2006. ICB is the largest bookkeeping institute in the world and aims to promote and maintain the standards of bookkeeping as a profession. All kinds of people, with different backgrounds, experiences and qualifications, are involved in ‘keeping the books’. Although some people seek out bookkeeping as a profession, others end up working as bookkeepers almost by accident — which is fine, but without training, they often lack the skills to do the best job possible.
My vision for ICB is to help bookkeepers find information and resources, and access insurance and quality support. Given ICB’s aim to provide bookkeepers with information of the highest quality, I’m very proud to write this foreword for Veechi’s book.
Good luck — and happy bookkeeping!
Matthew AddisonExecutive Director, Institute of Certified BookkeepersJune 2020
Introduction
I first started working as a bookkeeper in my late teens, doing handwritten books in leather-bound journals down by the docks in my hometown of Edinburgh, Scotland. Later, I emigrated to Australia, where I got a job working as a bookkeeper in the Blue Mountains, west of Sydney. There I worked with first-generation accounting software, substituting the peace of those inky journals for a battle of wills (myself versus the computer) that required a bizarre mixture of programming skills and native cunning.
By my late twenties, I had a small business of my own, employing four staff and offering bookkeeping services to local businesses. I finished a degree in accounting (which contributed surprisingly little to my bookkeeping expertise), and started writing for magazines and newspapers reviewing accounting software. In the following years, I wrote a fair few For Dummies titles, including MYOB Software For Dummies and QuickBooks For Dummies.
Even with all this experience behind me, I was in a bit of a quandary as to how to structure the project that you have in your hands right now — Bookkeeping For Dummies. I started looking around at other books about bookkeeping, and found that these books fell into two camps. The first camp took a traditional approach, explaining debits and credits, general ledger postings, and so on, all with the assumption that you’re doing books by hand. The second camp were accounting software how-to guides, such as the books I’d written about using MYOB or QuickBooks.
What I felt was missing was a book written for bookkeepers that explained the principles of bookkeeping — the art of bookkeeping, if you like — in the context of doing business in the 21st century. I’m hoping that the book that fills that gap is the one you’re holding in your hands.
For this third edition, I’ve updated every chapter to reflect the major changes that have affected the bookkeeping industry in the last few years. I talk more about cloud accounting and working with bank feeds, and explain new initiatives such as Single Touch Payroll. For those bookkeepers wanting to go out on their own, I’ve updated the chapters about the regulatory framework for bookkeeping and starting up your own bookkeeping business.
About This Book
This book talks about bookkeeping for all sizes of business, both large and small. I realise that you may be a business owner trying to figure out how to do a simple set of books for your new business, or you may be a seasoned bookkeeper working for a multimillion-dollar enterprise. I address both kinds of bookkeeper when writing this book, starting with the basics of bookkeeping, and building to more complex topics later on.
Foolish Assumptions
Because I’m so blindingly sensible, I don’t make any foolish assumptions about you, dear reader. I don’t assume that you have any bookkeeping experience or even that you’ve worked in a business before (although it’s possible, of course, that you’re a bookkeeper extraordinaire with 30 years’ experience under your belt). All I assume is that you are at least vaguely interested in bookkeeping and the results that the process yields.
Icons Used in This Book
Throughout this book you find icons in the margins to help you navigate through the text. Here’s what these icons mean:
You find this icon next to stuff relating to GST or taxation (ah, such fascinating topics).
Tie a knot in your hankie, pin an egg-timer to your shirt but, whatever you do, don’t forget these little nuggets.
This icon points the way to doing your job better, faster and smarter.
Real-life stories from bookkeepers who’ve been there provide all the history lessons you could ever want.
A pitfall for the unwary. Read these warnings carefully (then you can’t say no-one told you …).
Where to Go from Here
Bookkeeping For Dummies isn’t a gripping novel to be read from cover to cover. This book is designed (all 21 bite-sized chunks) so you can pick it up at any point and just start reading.
If you’re a business owner and you’ve never done bookkeeping before, and you’re looking to set up a bookkeeping system for your own business, I recommend you read Chapters 1 to 10 before doing much else (although you can skip Chapter 9 if you don’t have any employees). On the other hand, if you’re an experienced bookkeeper looking to expand your skills, by all means skim read the first few chapters, but start reading with more seriousness from Chapter 11 onwards.
Part 1
First Steps
IN THIS PART …
Discover the qualities of a good bookkeeper, as well as what training, skills and experience is required.
Build your first list of accounts, and learn about the difference between assets and liabilities, cost of sales and expenses, equity and income.
Get serious about bookkeeping and discover the theory that lies behind debits and credits.
Find out the difference between cash accounting and accrual accounting, and how this difference affects the way you record transactions.
Chapter 1
Introducing the Bookkeeping Game
IN THIS CHAPTER
Working through the bookkeeping life cycle — from chrysalis to butterfly
Matching bookkeeping systems to the game in hand
Keeping the law on your side
Settling into a certain mindset
Deciding whether you need to get more training
In some ways, bookkeeping is like cooking up a fine meal. The process of washing and chopping and steaming and frying isn’t much to write home about. What makes everything worthwhile is the outcome: The hot taste in your mouth, the warm feeling in your belly. A good bottle of red simply adds to the fun.
In the same way, adding up receipts and paying bills aren’t the most exciting activities in the world. What brings the buzz to bookkeeping are the results: An organised office, cash in the bank and a set of financial reports that help a business succeed. After all, without a Profit & Loss report, how does a business know how it’s doing? And without a Balance Sheet, how can a business owner gauge their personal worth?
In this chapter, I outline the bookkeeping life cycle from go to whoa, and talk about setting up systems and staying on the right side of the law. I also explore the qualities of a good bookkeeper: Not just someone who can record transactions accurately, but also someone who cares about the financial statements that they generate. And I cover training as a bookkeeper and what skills you need.
Understanding the Bookkeeping Life Cycle
Bookkeeping can have a certain anachronistic quality to it, especially once you start getting familiar with some of the terminology. But like many things that stem from the past and continue to be relevant today, bookkeeping is a deeply logical process that flows beautifully from one stage to the next.
The essence of bookkeeping — and the beginning of any bookkeeping entry — is a transaction. You already know instinctively what a transaction is: The sale of goods, the purchase of services or the shifting of money between accounts.
Your gig as a bookkeeper is to ensure every itsy-bitsy transaction that takes place gets recorded, and you do this using a journal. In the old days, this journal was a large book, smelling of ink, sweat and musty leather. Nowadays, this journal can take the form of a spreadsheet, an entry in your accounting software, or a bank feed downloaded directly from your bank. (Nowadays, these entries are often part of the business activity itself. For example, if configured correctly, an online sale should generate an invoice automatically, as well as the necessary bookkeeping entries.)
Whenever you record transactions, you’re making a journal entry, and as you record each journal entry, you need to decide what account this entry goes to. If this transaction is an expense, for example, is it for advertising, rent or staff wages?
Previously, bookkeepers would total the columns in each journal at the end of each month, and transfer these totals to the general ledger (a great fat tome that summarised the entries from all the other journals). This transfer process was called posting, and these days happens automatically if you use accounting software.
The last step of the traditional bookkeeping cycle is to generate a report using the final balances from the general ledger, creating a document called a trial balance. The amounts in the trial balance form the basis for key pillars of wisdom such as the Profit & Loss report, which summarises income, expense and net profit, and the Balance Sheet report, which summarises the value of assets, liabilities and equity. (Happily, if you use accounting software, these reports are generated automatically.)
So there you have it: The life cycle of bookkeeping in a nutshell, with a distinctly historical twist, starting with a simple transaction and culminating in a set of financial statements that let everyone know what’s what.
Figuring How Often to Do the Deed
So how often do you need to do this whole bookkeeping game? On the one hand, you don’t want to get so behind that you can’t produce reports or see how much customers owe you but, on the other hand, you don’t want to overdo things, working on your books so often that you record only one or two transactions each time.
While you’re of course free to chart your own course, here’s a look at the pluses and pitfalls of the two most common methods: Doing your books once every few months (see the next section, ‘Working with a shoebox’) and doing your books on a regular basis (see the section ‘Doing the books as you go’, later in the chapter). By the way, if you’re weighing up these methods, Chapter 4 also provides a lot of info about the regular deadlines that form part of a bookkeeper’s schedule.
Working with a shoebox
Shoebox accounting brings a comfortable chaos to any business. As the financial year ticks by, the owner of the business dumps all bank statements, receipts and supplier bills in a messy heap somewhere. Once a year or every few months, usually days before a tax return or Business Activity Statement is due, either the business owner or an unfortunate bookkeeper retrieves this unhappy heap and attempts to put it in some kind of order.
I’ve been the unfortunate bookkeeper in this situation many a time. Admittedly, I’ve had to deal with very few shoeboxes but, instead, piles of dog-eared receipts in scrappy manila folders, old fruit boxes, tattered briefcases and, one time, a complete timber drawer straight out of the client’s desk.
Shoebox accounting has its advantages:
You can ignore the drudgery of year-round bookkeeping, a tactic that suits the ostriches of this world.
Bookkeeping is sometimes a relatively swift process, because you churn through a whole year’s transactions in one hit. If you use accounting software and have bank feeds connected, coding transactions from the bank feeds for a few months or even a year at a time can actually be quite efficient.
And disadvantages …
You miss out on the benefits of doing your books, such as up-to-date financial reports or budgets.
By the time you do the books, you’ve forgotten what some of the transactions are, so you waste hours trying to do things like match up receipts against miscellaneous electronic debits from your bank account.
In short, I recommend shoebox accounting only for the smallest of small businesses, such as a hobby business, or a business with no GST, no wages, few bills and irregular income.
Accounting software combined with bank feeds greatly improves the old-fashioned style of shoebox accounting. The neat thing about bank feeds is that even if a business owner doesn’t log on to their software for six months or more, when they do finally log on, most transactions are there automatically. Also, the ease of cloud accounting often converts even the most reluctant of shoebox bookkeepers into bookkeeping enthusiasts. (Note: Of course, although the combination of bank feeds and bank rules makes recording business expenses super quick, other transactions such as customer invoices and employee pays are harder to automate.)
A CAUTIONARY TALE
When my husband and I first started living together, I didn’t dare interfere with his trusted shoebox system of bookkeeping. I bit my lip as I observed him stuffing unopened bank and credit card statements into the bulging drawers of the office desk, and scarcely muttered a word as he deposited customer cheques into his bank account without even keeping a record of who had paid him, and what for.
A year or so ticked by before my husband delicately suggested that in the spirit of relationship bonding, I might like to do his books for him (adding that his tax return had been due the previous month). Sure, I replied, with my inveterate Pollyanna ‘can do’ attitude.
It was bad, really bad. ‘What was this debit for in your bank statement?’ I’d ask. He’d shrug. I’d shrug back. Another tax deduction lost. ‘Don’t you have a single receipt for a year’s worth of petrol?’ I’d ask. ‘No, I hate fiddly little bits of paper’, he’d reply.
But the sting came when I got to his credit card statements. ‘What’s this debit for $120 every month for a year, made in US dollars?’ ‘Nothing to do with me’, he replied. I queried the debits with the bank, who confirmed they were a scam, but because too much time had elapsed before me querying the transactions, a refund was impossible.
‘I told you so’, I announced triumphantly. ‘That’s okay, darling’, he replied. ‘I’m fine with you doing my books all the time. You’ll find the paperwork in that drawer over there.’ I remain unconvinced as to whether this is an improvement in our married life, or not.
Doing the books as you go
Most businesses do most of the day-to-day bookkeeping as transactions occur. If you use accounting software, every time you make a sale to a customer, you record the sale in your books. Voilà, the bookkeeping for this transaction is complete. Similarly, when you receive a payment, you record the transaction against outstanding customer invoices and, in the process, you complete the bookkeeping for the transaction.
I find that most bookkeepers arrive at a certain rhythm, determined by how often a business needs to pay bills, issue customer statements or generate reports. Read through the following different activities and see whether you can pick up any tips about how to organise your time.
Record sales transactions once and once only
Here’s my number one rule: Generating a sales invoice and recording this sale in your books should be one and the same activity. In particular, keep the following in mind to avoid common pitfalls:
Don’t record sales in a word processor:
If you use accounting software to do your books, use your accounting software to record sales. Don’t be tempted to use a word-processing program to record sales, even if using a word processor is more familiar to you. Spend the time customising the sales templates in your accounting software instead.
If you’re a retailer, integrate your point-of-sale system and your accounting software:
If you integrate your point-of-sale system with your accounting software, daily sales totals and stock movements carry across automatically from one system to another. In other words, as soon as you make a sale in the shop, the bookkeeping for this sale is taken care of. Ah, the wonders of modern life.
Ditch handwritten docket books: If you (or your employees) write invoices by hand while out in the field, it’s time to switch to a cloud-based accounting solution. You can then use a smartphone or a tablet to create invoices on the run. For more about cloud accounting, see Chapter 5.
Pay supplier accounts in batches
Checking supplier bills, balancing supplier statements and paying accounts are some of the most time-consuming parts of a bookkeeper’s job.
I talk more about streamlining workflow for bill payments in Chapter 7, but my main tip for bookkeepers is to set a schedule for bill payments, and then stick to it. For example, if you have weekly accounts, set one day per week where you settle these bills. If you have monthly accounts, set aside one day per month (usually a day that falls between the 20th and the last day of the month).
Avoid paying bills in dribs and drabs, and invest time to negotiate payment terms with your suppliers, rather than cash on delivery or payment in advance.
Set up bank feeds to import transactions automatically
So long as your accounting software includes this functionality, you can set up bank feeds so that every time you log onto your accounting software, all your banking transactions are imported automatically. All you have to do is allocate account codes to these transactions or match these transactions against transactions that have already been entered.
Chapters 5, 7, 10 and 21 talk more about working with bank feeds.
Use software to manage employee pays
If you have employees, chances are you already have accounting software that includes payroll features. If so, record wages straight into your accounting software, using the software to record start and finish times, and to calculate tax, superannuation and generate payslips. This way, the very process of calculating and generating employees’ pay means that the bookkeeping for payroll is complete.
With the introduction of Single-Touch Payroll, the ATO now require that you upload details of employee wages, PAYG and superannuation as soon as you process each pay run. For this reason, if you have employees, then subscribing to payroll features as part of your accounting software is pretty much essential. (The only situation in which this requirement may not apply is for small family businesses where all employees are family members and Single-Touch Payroll is not yet required.)
Reconcile often, reconcile well
Reconciling bank accounts is one of the core tasks for any bookkeeper (and a process that I talk about in much more detail in Chapter 10). Put simply, a bank reconciliation is when you match everything that’s on your bank statement against everything in your books, double-checking that your work is correct.
USE THE RHYTHM METHOD
For small businesses, try to establish a regular rhythm for when you do your books and, if possible, schedule as many bookkeeping activities as possible onto the same day per week. For example, set the same day every week to record both employee pays and weekly supplier payments.
If you find it hard to stick to a routine and find yourself doing books in dribs and drabs whenever you have a free moment, consider delegating the bookkeeping to somebody else. Many small businesses have a bookkeeper who comes in once per week for a half day just to complete the whole bookkeeping function.
Always reconcile the main business transaction account before chasing customers for money, lodging activity statements, or generating management reports. For small- to medium-sized businesses, this means you probably reconcile accounts once every week or fortnight; for micro businesses, once a month probably does just fine.
Staying on the Right Side of the Law
This is a book about bookkeeping, not about bureaucracy, but I’d be neglecting my duties if I didn’t point out that, as a bookkeeper, you want to stay wise to government rules and regulations.
Registering as a business
In Australia, every business has to have its own ABN (short for Australian Business Number). The only exception to this rule is if you’re doing something as a hobby. The easiest way to apply for an ABN is to go to www.abr.gov.au and follow the prompts to register.
You (or the business that you’re working for) may also be required to register a business name. The requirement to register a name depends on whether you’re a sole trader, a partnership or a company, and whether you intend to trade using your own name or a particular business name. If you’re just setting up a business and need more info on registering a business name, check out my title Getting Started in Small Business For Dummies (Wiley Publishing Australia).
Getting to grips with GST
Registering for GST is optional if your turnover is less than $75,000 a year. If you think that your business, or the business that you’re working for, is going to exceed this annual turnover threshold and isn’t yet registered for GST, then I suggest you speak to the accountant quick smart.
Of course, complying with the law in terms of GST is much more involved than simply registering. You need to get down on scintillating topics such as what’s taxable and what’s not, the key elements of a Tax Invoice, how often to submit GST reports and much more. I won’t go into the whole GST rave just now (this is the first chapter, after all) but for more about GST, skip ahead to Chapters 4 and 6.
Managing payroll
Whether you’re a business owner doing your own books or a bookkeeper doing the books for someone else, bear in mind that as soon as a business takes on an employee, the real fun begins. Government paperwork starts pouring through the door like owl-delivered invitations to Harry Potter.
As a bookkeeper or payroll officer, the scope of your job very much depends on the size of the business and the number of employees. At its simplest, a bookkeeper’s role is sometimes to record a couple of pay transactions per week, maybe checking tax deductions or calculating monthly superannuation. But at its most complex, a payroll officer may be in charge of the payroll for a couple of hundred employees, and have to be familiar with minimum pay rates, Fair Work obligations, convoluted leave calculations, termination pay and much more.
My main advice to you in this chapter is to be aware that as soon as a business takes on employees, it takes on a series of legal obligations at the same time. (I explore these obligations in detail in Chapters 9 and 11.) As a bookkeeper, your job is to wise up to these legal obligations and not underestimate what’s involved. The moment you feel out of your depth, let your employer know, so that you can either get some assistance or in-house training, or get some support for further study.
Developing an Attitude
Over the years, I’ve worked with and taught lots of bookkeepers: Young and old, qualified and unqualified. Some were scarily cocky, others achingly unsure, a few startlingly beautiful and many more rather careworn.
So what separates a good bookkeeper from a bad bookkeeper? Being young and beautiful doesn’t help much, that’s for sure (at least not with bookkeeping). Qualifications help, but aren’t the whole story either. Nay, I reckon what separates the wheat from the chaff is attitude.
A good bookkeeper cares when something doesn’t balance, and gets upset when receipts and invoices go missing. A bookkeeper cares that the financial statements make sense, and feels responsible when it comes to getting customers to pay on time. A good bookkeeper, in other words, is worth their weight in gold.
Convince yourself this stuff matters
If you’re already a bona fide, serious bookkeeper, you probably know that doing the books is a vital activity and that without the services you provide, the world would probably grind to a halt. Or, maybe you’re not a bookkeeper at all, but the owner of a small business skim-reading these pages as quickly as possible. You want to get your books done with a minimum of fuss, and maximum speed. You hate messing around with receipts, despise filing and feel ill at the very thought of tax returns. That’s okay! In the end, the ‘work’ of bookkeeping actually works for you.
Think of bookkeeping as a means to an end. Whatever your dreams, whether they’re to own your home outright, put the family business back on its feet or sail around the world in a 30-foot yacht, nothing much is going to happen if you don’t keep good tabs on your finances. And guess what? You can’t keep tabs on your finances unless you do your books.
Quit counting sheep
Am I preaching to the converted with all this chat about the importance of bookkeeping? Maybe you’re someone who knows what it means to lie awake at night counting sheep, worrying that the sheep don’t balance.
To you, I have a slightly different message. In this book, I encourage you to cast away your magnifying glass and grab a telescope instead. Sure, you’ve mastered the fine detail, but now you’re ready to move ahead and start looking at financial statements. Is the business making a profit? How does this year compare to last year? Is the business growing at a steady rate?
Surprisingly, I find a lot of bookkeepers don’t give a second thought to financial reports. Even business owners sometimes get so preoccupied generating sales and paying bills that the only measure of profitability becomes how much is left in the bank account.
Don’t miss out on the fun. As a bookkeeper, spend the time to read through Profit & Loss reports and Balance Sheets. You can help the owner understand what’s going on in their business, and chances are when you read these reports, you can spot any mistakes you’ve made. As a business owner, these financial reports are the reward for all your bookkeeping efforts.
Want to know more? Skip ahead to Chapter 15, which gives the lowdown on both Balance Sheets and Profit & Loss reports.
Do your job well
Whether you’re a professional bookkeeper or a business owner, you almost certainly want to get this bookkeeping lark over with as swiftly as possible. The stumbling block is figuring out how not to overcomplicate things. I’m often taken aback at how much time people take to do their books, wasting hours checking and double-checking, shuffling paper from one place to another.
I’m not suggesting compromising quality in order to get a job done quickly, but I am suggesting you put efficient systems in place, right from the word ‘go’. As you read this book, I give you my hard-won advice on the best way to approach a task. As you read, ask yourself, ‘Am I doing this task in the most efficient way?’, ‘Can I streamline processes by taking advantage of new technology?’ and ‘How can I avoid entering things twice?’
Getting Skilled Up
I’m often asked by business owners, ‘Do I need to do a bookkeeping course?’ For most small businesses, I reply that the answer depends, but a course isn’t always necessary. You may need help from your accountant, and some guidance from handy references like this one, but with a bit of patience, you should be able to master the basics. (I devote a lot of space to explaining everyday bookkeeping tasks in Chapters 7, 8, 9 and 10.)
On the other hand, if you’re a bookkeeper who works for more than one business, you need to be a whole lot more versatile. Not only will you probably need to register as a BAS Agent, but your client or employer expects you to be the expert and is unlikely to tolerate a long and slow learning curve. You’ll almost certainly want to devote some time to formal study.
The line between a professional bookkeeper and an accountant gets a little blurred at times. An experienced, well-trained bookkeeper often takes on some of the work that usually falls to the accountant to complete, in the same way as an accountant picks up loose ends if working with a bookkeeper who only provides the bare essentials.
Keeping your qualifications up to date
Even if you’ve been a bookkeeper for years, you may find that you’re legally obliged to formalise your experience with an official qualification.
In Australia, you must have a certain minimum level of qualifications if you assist clients preparing and lodging Business Activity Statements (BAS), because these qualifications are essential in order to register as a BAS Agent. You will also need to take out professional indemnity insurance. I talk more about the requirements for BAS Agent registration in Chapter 18.
Joining an association
If you’re serious about bookkeeping as your profession, I recommend you join a professional bookkeeping association or network, such as the Institute of Certified Bookkeepers (ICB), the Australian Bookkeepers Association (ABA) or the Association of Accounting Technicians (AAT).
Membership for these associations or networks is a relatively modest cost each year, but probably provides the only practical way for you to stay abreast of relevant changes in accounting software, bookkeeping professional requirements, tax legislation and much more. Not only that, but membership also provides you with a community of other bookkeepers so you can get together at conferences or local networking meetings.
Signing up to a course
The initial qualification for a bookkeeper is generally a Certificate IV in Financial Services in bookkeeping or accounting. As I mention a tad earlier in this chapter, in order to assist clients in preparing or lodging Business Activity Statements, you must first register as a BAS Agent, and this level of qualification is a base requirement. (I talk more about the BAS Agent registration process in Chapter 18.)
Other possible bookkeeping qualifications include a Diploma of Payroll Services, Diploma of Accounting or an Advanced Diploma of Accounting.
If you’re not sure whether you’re ready to commit to formal bookkeeping qualifications, you could try one of the more general bookkeeping courses offered by community colleges or private training organisations. Bear in mind that if you do a course that isn’t run by a nationally recognised Registered Training Organisation, you may not receive credits if you decide to go on to more formal study and you almost certainly will not gain sufficient qualifications to register as a BAS Agent.
The other training that could work for you is a one-day or two-day course specific to whatever accounting software you’re using, such as an MYOB, QuickBooks or Xero course. These courses are good at getting you started with doing the books for your business, but you won’t get the same kind of theoretical understanding about how bookkeeping works as you would with a more specific bookkeeping course. You also won’t receive any kind of formal qualification.
If you are (or are interested in becoming) a contract bookkeeper, I talk more about this in Chapters 17 and 18.
A CHOSEN PROFESSION (EVENTUALLY)
Elisha took many years to arrive at bookkeeping as her chosen profession. Initially a dental assistant, Elisha stayed home for almost 15 years when her children were young. During that time, Elisha’s husband started his own plumbing business and Elisha assisted by doing the books. At first, she did these books by hand, but later switched to doing the books on the home computer.
Elisha felt very hesitant about bookkeeping, because she had never enjoyed maths at school. However, she attended a couple of one-day courses to learn about accounting software, and slowly she felt her confidence build up. When her youngest child started school, Elisha enrolled for a Diploma of Accounting at TAFE.
The family’s accountant knew what a good job Elisha did with her own books and didn’t hesitate to recommend Elisha to some of his other clients. Elisha soon built a solid business working as a contract bookkeeper for several small businesses in the area. Elisha has now qualified and is a proud member of the Institute of Certified Bookkeepers.
Elisha has grown to love bookkeeping as a profession, and enjoys her financial independence, flexible hours and the diversity of the people she works with.
Chapter 2
Creating a Framework
IN THIS CHAPTER
Finding a spot for every single transaction
Gathering materials with account classifications
Building foundations for your Profit & Loss report
Analysing income with a bird’s-eye view
Making everything just right with Balance Sheet accounts
Admiring the finished home — your first chart of accounts
If bookkeeping were just about doing your tax, the way you categorise information would be pretty simple. You would likely only use a handful of accounts to categorise expenses, and perhaps even fewer for your income.
However, your job as a bookkeeper is about much more than tax. You want to generate reports that explain exactly where your income comes from, which activities generate the most moolah, what the expenses are, how actual results compare against budgets, and lots more.
The way you categorise business transactions — in other words, the names of the accounts you use — provides the key to generating this kind of clued-up business reporting. Figuring out the accounts required takes a few smarts, because every business is unique and needs a custom-made list of accounts. But when complete, this list forms the framework for every business report.
In this chapter, I help you to build your own list of accounts. I wax lyrical about the differences between an asset and a liability, between income and expenses, and between earthlings and aliens. Discover how to set up a killer list of accounts that not only keeps the tax bigwigs happy, but helps this business flourish to boot.
Putting Everything in Its Place
When I first worked as a bookkeeper, I worked with traditional handwritten ledgers. The ledger would list dates and amounts down the left side, followed by a series of columns all the way across, with a different column for each kind of expense.
Regardless of how you do your books these days, the concept remains the same. If you work with a spreadsheet, chances are your books look pretty similar to Figure 2-1. Even with accounting software, the core information remains constant. Figure 2-2 shows a similar list of transactions in Xero, with a columns for the date, payee name, transaction description, allocation account, tax code and amount. (In Figure 2-2, Xero shows both incomings and outgoings for the selected bank account; in Figure 2-1, the spreadsheet shows outgoings only.)
FIGURE 2-1: A cash disbursements ledger created in Excel.
FIGURE 2-2: An account transaction listing in Xero.
Regardless of how you record transactions, the choice of account is crucial. In Figure 2-1, the accounts are the headings that run along the top of each column (apart from the first three). In Figure 2-2, you select the allocation account for each transaction listed.
Your job, as Bookkeeper-Chief-in-Command, is to decide exactly what these accounts should be. (After all, how can you record transactions if you don’t know where to put ’em?) The rest of this chapter gives lots of tips about how.
Classifying Accounts
A chart of accounts is the list of accounts to which you allocate transactions. These accounts describe what a business owns and what it owes, where money comes from and where money goes.
Accounts fall into six broad classifications:
Assets:
Things owned by the business, such as cash, money in bank accounts, computers, buildings and motor vehicles.
Liabilities:
The stuff that keeps people up at night, such as credit card debts, supplier accounts, tax owing and bank loans.
Equity:
The owner’s stake in the business, made up of money invested initially, or accumulated profit/loss built up over time.
Income:
Quite simply, money generated from sales to customers or, for non-profit organisations, money received from funding bodies.
Cost of sales:
What it costs in raw materials, supplies or production labour to make the goods sold.
Expenses:
Business overheads, such as advertising, bank charges, interest expense, rent or wages.
Assets, liabilities and equity belong in the Balance Sheet. Income, cost of sales and expenses belong in the Profit & Loss. Knowing where transactions end up helps you to classify everything correctly and, with this in hand, creating financial statements is easy as pie.
I explore each of these account classifications in much more detail later in this chapter, discussing what kinds of accounts typically belong under each one.
Building Your Profit & Loss Accounts
How you build your Profit & Loss accounts depends on what kind of system you’re using. If you’re working with a spreadsheet, the accounts are simply the headings of the columns where you list transactions. If you’re working with accounting software, you typically go to either your Accounts List (in MYOB) or your Chart of Accounts (in Reckon, QuickBooks Online or Xero).
When I’m helping bookkeepers set up accounts for a business, I always start by making sure these accounts make sense. I don’t hesitate to add or delete accounts, change account names or reorganise the order of accounts. This way, I’m sure my clients end up with information that provides the maximum gain for minimum pain.
Analysing income streams
Most businesses have more than one stream of income. Maybe you’re a builder who earns money from new houses, as well as renovations and extensions. Maybe you’re a landscaper and earn money from a combination of gardening services and reselling plants. Or maybe you’re a musician who also does a bit of teaching on the side.
As a bookkeeper, think about the different sources of income a business generates. If a business has fewer than five income accounts, have a think about how you could describe income in more detail. Each major source of income needs a separate income account. For example, my friend who is a builder divides income into four accounts: Bathroom Sales, Kitchen Sales, Tile Sales and Renovations. This way, he generates regular Profit & Loss reports that reflect how his business generates revenue.
Accountants also like to talk about other income or abnormal income. Other income or abnormal income includes any income that’s not really part of your everyday business, such as interest income, one-off capital gains or gifts from mysterious great-aunties. Other income gets reported separately at the bottom of a Profit & Loss report.
Separating cost of sales accounts
Whatever kind of business you have, you probably have some expenses that directly relate to sales. In accounting jargon, expenses that directly relate to sales are called variable expenses (also sometimes called direct costs or cost of goods sold or cost of sales). Expenses that don’t directly relate to sales are called fixed expenses (also sometimes called indirect costs or overheads).
This theory may seem all very well, but you need to understand how it applies in the context of your own business (or those you’re doing the books for). Here are some examples that may help:
If you’re a manufacturer, variable costs are the materials you use in order to make things, such as raw materials and production labour.
If you’re a retailer, your main variable cost is the costs of the goods you buy to resell to customers. Other variable costs, particularly for online retailers, may include packaging and postage.
If you’re a service business, you may not have any variable costs, but possible variable costs include sales commissions, booking fees, equipment rental, guest consumables or employee/subcontract labour.
In contrast, fixed expenses are expenses that stay constant, regardless of whether your sales go up and down. Typical fixed expenses for your business may include accounting fees, bank fees, computer expenses, electricity, insurance, motor vehicles, rental, stationery and wages.
