Bookkeeping Basics

We’ve talked before about the basic formula in bookkeeping. Let’s go a little deeper and talk about the Chart of Accounts. How many of y’all know what I’m talking about when I mention the Chart of Accounts?

No judgement. I’ve just been doing this for so long that it’s hard for me to know what everyone knows (or doesn’t know) when it comes to bookkeeping.

If you don’t know what the Chart of Accounts is, it’s the foundation for everything we do in bookkeeping. It creates different buckets where we assign the items in our basic formula. (Remember Gross Income - Expenses = Net Income?)

The outline usually follows how things get organized on your reports.

Bank Accounts

Other Assets

Loans & Credit Cards

Other Liabilities

Equity

Income

Expenses

We can go a little deeper and detail what Expenses usually look like in the Chart of Accounts.

Advertising

Bank Charges

Automobile Expenses

Insurance

Legal & Professional Fees

Meals & Entertainment

Office Supplies

This is a basic example, but feel free to use this as a template for your own Chart of Accounts.

When you have this foundation, you can successfully do your bookkeeping. You’ll use this information when categorizing your transactions. From there, you’ll be able to pull reports and understand how your activity affects the health of your business.