Bookkeeping

Bookkeeping is the foundation that accounting is built on. Every invoice sent, bill paid, sale made and wage paid needs to be written down accurately, with the date, amount and type of transaction. Today this is usually done with accounting software rather than paper ledgers.

A bookkeeper records transactions, keeps receipts and invoices, reconciles bank statements against the records, tracks who owes the business money and whom the business owes. These records are then used to prepare financial statements, tax returns and management reports.

For example, when a café buys coffee beans for 400 on credit, the bookkeeper records the purchase and the amount owed to the supplier. When the café pays the bill a month later, the bookkeeper records the payment and clears the amount owed.

Bookkeeping is more routine than accounting, which involves analysing, interpreting and reporting the figures. But without accurate bookkeeping, the reports are unreliable. Many small business problems, such as missed tax deadlines or unexpected cash shortages, start with poor record keeping.