Creating a Framework
In This Chapter
Finding a home 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
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. Income would be just one total, and most expenses would be lumped together, with only stuff like bank interest, rent and wages separated on reports.
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 ...