Bookkeeping 101
When recording your company's financial
transactions, two of the major
sources for information will be
your business checkbook and credit
card statements. Every transaction
from both your checkbook and credit
card statements should be entered
in your accounting books, along with
noncash income expenses, including
trades, mileage, converted property
and per diem allowances. Here are a
few key items you are going to want
to be aware of when doing your own
bookkeeping.
Accounting journals: Records
that keep transactions in chronological
order by type. Cash receipts
and your check register are two examples
of accounting journals.
General ledger: A record that
lists transactions by account type.
Cash, massage income and office
supply expenses are three examples
of items that would appear on a general
ledger.
Balance sheet: A balance sheet is
a financial picture of a business on
a specific date and includes assets,
liabilities and equity. Assets include
what you own and liabilities reflect
what you owe. Your equity is essentially
the balance difference when
your total liabilities are subtracted
from your assets.
statement of income & expense:
You may have also heard this referred
to as a profit and loss statement.
This statement summarizes
income and expenses for a specific
period of time. Most cash-basis taxpayers
keep books and file income
taxes on a calendar year. The profit
or loss is determined by subtracting
deductible expenses from taxable
income. The income you report and
pay taxes on in your Schedule C
return is not the case you take out
of your business, but rather the net
profit or loss income from line 31.
Draws: Money you take out of your
business for personal use.
To easily summarize many of
these transactions, you might want
to take a look at getting some accounting
software. Regularly and
habitually entering business information
has a variety of advantages,
including making calculating your
quarterly estimated taxes less difficult;
easing the burden of having to
remember — and find — all the necessary
paperwork, such as receipts and
per diem mileage; and keeping you
on track throughout the year instead
of having to hurry to gather and calculate
all transactions right before
tax time.
Many of these programs also allow
you to create subcategories for
income and expenses, a feature that
may prove useful when you are looking
for additional detail at the end
of the year. For example, you can
set up subcategories for supply purchases,
including linens, massage
oils, aromatherapy, disposable face
covers and cleaning products, giving
you a few different options when you
file your tax return. You may decide
to include all these costs on a single
line, or you might want to report
these expenditures as two different
deductions — supplies and other.
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American Massage Therapy Association®
