Chapter 3

Keeping the Books and Guarding the Family Jewels

IN THIS CHAPTER

Distinguishing between bookkeeping and accounting

Getting to know the bookkeeping cycle

Making sure your bookkeeping and accounting systems are rock solid

Doing a double-take on double-entry accounting

Protecting against innocent errors and cunning fraud

Keeping books in the cloud and on the ground

Ithink it’s safe to say that most folks are not enthusiastic bookkeepers. You probably balance your checkbook against your bank statement every month and somehow manage to pull together all the records you need for your annual federal income tax return. But if you’re like me, you stuff your bills in a drawer and just drag them out once a month when you pay them. And when’s the last time you prepared a detailed listing of all your assets and liabilities (even though a listing of assets is a good idea for fire insurance purposes)? Personal computer programs are available to make bookkeeping for individuals more organized, but you still have to enter a lot of data into the program, and in my experience, most people don’t put forth the effort.

Individuals can get along quite well without much bookkeeping — but the exact opposite is true for a business. First of all, a business needs a good bookkeeping system simply to operate day to day. An army marches on its stomach. A business marches on data and information, without which it literally couldn’t make it through the day.

In addition to facilitating day-to-day operations, ...

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