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How To Start Bookkeeping (FREE Template) - YouTube
Channel: Accounting Stuff
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in this video you'll find out how to
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organize your business's finances using
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an ancient technique it's simple it's
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free and you can have it up and running
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in a matter of minutes hey there welcome
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back to the channel I'm James this is
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accounting stuff and in today's video
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we're going to head back in time why
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because I want to show you a quick and
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dirty method that you can use to start
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bookkeeping your small business today
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have you ever struggled with keeping a
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record of all of your sales and expenses
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can you tell me what your profit or loss
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the last month was maybe you've been
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stashing receipts in the shoe box under
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the bed but it's all good
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you'll sort them out when you find the
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time don't worry we've all been there
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and seriously if any of that resonates
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then congratulations you're watching a
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video about accounting which means
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you've taken the first step towards
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grabbing your business's finances by
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there and you can take that second step
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by subscribing to this channel for more
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weekly accounting videos the biggest
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reason that small businesses fail is
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because of poor cash flow management so
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we're going to make it dressing that on
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number one priority on accounting stuff
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we've talked a lot about double entry
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accounting even when we haven't
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mentioned it by name the accounting
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equation debits and credits pretty much
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everything we've covered in the
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accounting basics playlist is a direct
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consequence of one beautifully simple
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idea that there are two equal and
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opposite sides to every business
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transaction because in the world of
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finance money can't magically appear or
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disappear but in this video we're going
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to take all of that stuff and throw it
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out the window double entry accounting
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might be one of the greatest discoveries
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of the past six hundred years but it was
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invented for merchants in Venice who
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were doing complex trades with loads of
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different groups of people not all
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modern businesses are as complicated as
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that so not all businesses need to use
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double entry accounting the alternative
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predates double entry accounting by
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literally thousands of years and it
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still has its place today especially
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when we're talking small businesses with
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minimal financial transactions
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can you guess what it's called single
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entry accounting I'm going to show you
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how you can use single entry accounting
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to manage your business's cash flow
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right now don't forget to watch this
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video through to the
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because I have a free template to share
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with you and I also want to make it
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clear that this quick and dirty template
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isn't for everyone it has its flaws so
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hear me out and we'll see if it fits in
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with your business let's go we'll kick
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things off with a definition the single
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entry system single entry bookkeeping or
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single entry accounting whatever you
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like to call it is a method of
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bookkeeping that only recognizes one
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side of a business transaction as an
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accounting entry bookkeeping is what we
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call the process of recording all of
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your business's financial transactions
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and that one side that we're going to
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recognize is an accounting entry to the
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cash account I said earlier that the
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biggest reason that small businesses
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fail is because of poor cash flow
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management single entry accounting is
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about taking control of your cash
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account so you've got a record of all of
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the cash flowing in and out of your
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business and what's great about this
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system is that anyone can do it it's
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simple and practical all you need to get
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started is Excel or Google sheets let me
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show you here we are in Google sheets I
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like to use sheets because it's free
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everything safely stored in the cloud
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and all you need to do to get started is
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have a gmail account and this is what a
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single entry system looks like in its
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simplest form we have a table that
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summarizes all of your business's
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transactions in a cash ledger which is
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basically another name for your cash
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account this is called a three column
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ledger because we have three columns for
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date description and amount for this
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example let's imagine that you're
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starting an e-commerce business from
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scratch you're a keen writer a dog lover
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and a massive Harry Potter fan so you
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decide to combine all of these passions
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together to create and sell Harry Potter
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fan fiction under the pseudonym JK
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growling let's do the bookkeeping for
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your first month in business imagine
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we've gone back in time is January 2000
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the new millennium the Prisoner of
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Azkaban came out six months ago and
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you're desperate to get started on your
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fanfiction the first thing we need to do
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is identify the accounting period so we
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can go and write January 2000 in the top
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corner of your empty cash ledger we now
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return to all of the transactions that
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happened in
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January at the start of the month your
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opening balance was zero this is a brand
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new business so there's no cash to begin
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with you decide to head down to the bank
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and open up a new checking account
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that's a good call because you don't
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want to get all of your business and
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personal expenses mixed up in your
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personal account on the fifth you decide
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to transfer five thousand dollars into
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your new checking account this is your
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initial investment if we would double
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entry accounting you call this owner's
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equity but we aren't so we won't a few
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days later you decide to buy a laptop
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from the Apple Store this is what you're
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going to write all of your fanfiction on
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you cough up a whole two thousand
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dollars on the spot and enter it into
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your cash ledger next you want to set up
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a website so you pay thirty five dollars
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to register a domain online and a
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further one hundred dollars in hosting
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fees you complete your ebook in record
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time and within a couple of days you put
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up your first ad the ad clearly works
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because two days later you make your
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first sales over the next two weeks you
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incur some bank fees make some more
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sales and decide to buy a swish new
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office chair so you can write a home in
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comfort
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JK growling closes out the month with
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two thousand eight hundred and forty
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three dollars in the bank and has made a
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loss of two thousand one hundred and
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fifty seven dollars we can find that by
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taking the total of all of your income
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and expenses for the month ignoring the
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initial investment because that doesn't
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fit into either category great so we can
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easily calculate your business's profit
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and cash is being closely monitored but
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on closer inspection this template just
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looks like a copy of your bank statement
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if only there was a way to get some more
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detail then this will become really
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valuable to us and that is where the
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multi column approach comes in the multi
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column ledger works in a very similar
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way to the three column ledger we still
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have the three columns for date
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description and amount but in the middle
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we packed in some extra detail the first
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thing to note is that we now have a
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reference column this is essential for
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any organized bookkeeping system in this
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column we give each transaction a unique
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reference number to help us identify it
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and if you're really savvy you can say
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back
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support each transaction in your Google
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Drive with a naming system that
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corresponds with these unique reference
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numbers that way you can easily find and
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pull out the invoice for your office
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chair if you need it
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because everything is cross-referenced
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moving on to the right we have grouped
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the columns into two main categories
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cash in and cash out this allows us to
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categorize all of our income and
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expenses into their own distinct columns
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this will be a big help when tax time
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comes around because it makes it easy to
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identify all of JK Rowling's taxable
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income and deductible expenses now we're
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talking
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you can set up one of these templates
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for yourself by copying this layout or
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if you'd like to save some time you can
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use this one for free and get started
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right away I'll drop a link to it down
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in the description below just delete the
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sample data and you can get cracking one
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important thing to note you will need to
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check the transactions in this template
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against the ones in your bank statement
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each month to make sure that none are
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missing this is called doing a bank rec
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and it's critical because an incomplete
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cash ledger isn't much used to anyone
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I've made a video explaining how to do a
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bank reconciliation and you can find up
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here in the corner so that's how to
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start bookkeeping for your small
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business the quick and dirty way this
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works great if you have minimal
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transactions because it's fast and easy
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to maintain
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very little accounting knowledge is
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required so you might be able to get
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away without having to hire a qualified
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accountant or bookkeeper hold up that
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been said this system does have its
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flaws it's the quick and dirty method
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after all it's not for everyone
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the double-entry accounting system is
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one of the greatest discoveries of the
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past 600 years because there are two
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sides to every financial transaction
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this single entry accounting system only
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recognizes one of these sides so it
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gives you an incomplete picture of your
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business's books you're also cash
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accounting so you'll be exposed to all
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of the disadvantages of that method
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things like fluctuating profits caused
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by recognizing related income and
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expenses in separate accounting periods
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more on that in this video
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another problem with cash accounting is
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that you have no idea what your
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business's financial position is which
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is not ideal if your business buys or
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sells on account with credit times
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because you won't be tracking your
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counts receivable and accounts payable
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so if that's the case then what's the
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point
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this single entry accounting method is a
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great place to start for anyone who runs
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a small business with few transactions
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and little to no assets or liabilities
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especially if you don't have a
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bookkeeping system in place yet this
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technique will help you get your books
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in order many small businesses are using
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a variation of this right now
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however double entry accounting is the
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king of all accounting systems it's a
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much tighter method with built-in checks
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that leave less space for errors it also
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gives you a complete record of your
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financial transactions there's a reason
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why all large businesses use double
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entry accounting so I would seriously
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consider upgrading to it at some point
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the good news is that a single entry
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accounting record can be transferred
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into a double entry accounting system at
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any time and if you've got things
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organized using a templates like the one
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I've linked below then it will make the
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whole process a lot less stressful these
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days double entry accounting is becoming
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more and more accessible to everyone
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there are a whole bunch of cloud
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accounting software packages out there
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that do all of the double entries for
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you so you don't even have to think
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about them a couple of the biggest names
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are QuickBooks Online and zero I'll link
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to a free trial of QuickBooks Online
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down in the description and here's a
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video that I made that will give you a
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general overview of how it works if
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you'd like to learn more about
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double-entry accounting I made a whole
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playlist covering accounting basics for
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beginners that you can find here any
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questions let me know down below in the
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comments and you can subscribe to
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accounting start by clicking on this
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circle for more weekly videos
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