Moxie Bookkeeping Basics

What is Bookkeeping?
Defined as the maintenance of systematic and convenient records of money transactions, the essential purpose of bookkeeping is to organize your information in a way that easily reveals the amounts and sources of the profits and losses for any given period. Proper bookkeeping shows the nature and value of the assets and liabilities of a firm, as well as its net worth at the close of that period.
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Bookkeeper vs. Accountant-- What's the Difference?
A bookkeeper handles the financial record-keeping and reporting. An accountant specializes in the preparation and filing of taxes, and tax law.

While accountants can provide bookkeeping services, usually they do so at a premium rate, and tend to organize the information to make tax filing easy, rather than to give you the full details of your financial picture. A bookkeeper, for instance, can track detailed sales by item or service, when an accountant might just call it all “Sales Income”.

Having a good bookkeeper is just as important to the growing business as having a good accountant. One can not and should not replace the other.
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Why Hire a Bookkeeper at all?
There are three people who can be doing your books: yourself, a staff member, or a skilled bookkeeper.

If you're doing your own books, the time you spend maintaining them may be better used in exploring new opportunities and developing relationships. Accurate books are crucial to a healthy business, but so is having the freedom to concentrate on creative direction.

If a staff member is doing your books, this is most likely a function secondary to what you hired them for. They may be distracted by other important tasks on a regular basis, and they may not even have any expertise in keeping books at all. They may not have any interest, either. Consistent elementary mistakes can easily be made and just as easily overlooked for years.

If a profesional bookkeeper handles your books, you have a qualified professional who cares about the accuracy of your books, who has the experience to set up an efficient system,and the skill to post transactions accurately.
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ACCOUNTING 101

Assets (1000): What is owned by and owed to the business
Bank - Any Cash Account (Checking, Savings, Money Market, CD, Petty Cash)
Accounts recievable (A/R) - Money owed by Customers to the business for goods or services.
Other Current Asset - Asset that is expected to be used or sold in less than 1 year. Short term investments, inventory.
Fixed Asset - Any depreciable equipment, buildings or property.
Other Asset - Prepaid expenses, long-term investments
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Liabilities (2000): What is owed by the business to others
Accounts Payable (A/P) - Money owed to Vendors by the business
Credit Card - Vendor Credit Account, special kind of account payable that reconciles like a bank account.
Other Current Liability - Short term (less than one year) loans and payroll taxes.
Long Term Liability - Loan payable over more than one year (long-term lease, mortgage)
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Equity (3000): Net worth of the business. (Assets less Liabilities)
Equity - Owner’s money in/out of the business, net gain/loss from previous years, company stock.
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Income (4000): Money In to the business
Income - Money earned by the business for it’s principal activities (sale of goods/services)
Other Income - Unearned Revenue (interest income, gifts received, personal income)
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Cost of Goods Sold (5000): Necessary costs to produce items sold
Cost of Goods Sold - direct costs of goods/services sold (subcontractors, raw materials, some wages)
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Expense (6000): Money Out
Expense - General Costs of doing business (overhead, utilities, administrative staff, rent)
Other Expense - Costs not associated with doing business (personal expenses, interest expense)
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What do the Numbers Mean?
An account is a label for recording an amount of money owed by or to your business, or allocated to a particular purpose. Many accountants prefer to number each individual account to make reporting easier.

Each type of account (assets, liabilities, equity, etc) is assigned a standardized number which is usually placed in the thousands column so it can be easily identified.

For example, a checking account and a savings account might be numbered 1001 and 1002; "1000"signifies that these are asset accounts, and the "1" and "2" represent the specific accounts.
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