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Basic Bookkeeping. Basic Bookkeeping. Starting up a small business? Working as an office administrator? B ookkeeping responsibilities can be overwhelming !

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basic bookkeeping1
Basic Bookkeeping

Starting up a small business?

Working as an office administrator?

Bookkeeping responsibilities can be overwhelming!

In this course we will teach you the basics of bookkeeping. Learn what your accounting responsibilities are, basic accounting terminology, the basics of financial statements and how to prepare your files for year end

business organization types
Business Organization Types
  • Proprietorship
  • Partnership
  • Corporation
the fiscal year
The Fiscal Year
  • A Fiscal Year is an accounting time period that is one year long
  • Fiscal year ends may vary from the calendar year
  • Corporate Tax returns are due 6 months after the corporations fiscal year end
account types
Account types
  • Accounts track all of your accounting transactions and allow you to categorize your transactions
  • There are standard account types which are the main categories that all businesses follow

Assets, Liabilities, Equity, Revenue, Expense

account types1
Account types
  • Asset Accounts (What you own)– include bank accounts, petty cash, equipment, buildings and land
  • Can be liquidated for cash
  • Are generally valued over $500.00 and usable for more than one year
  • The balances in asset accounts carry forward from year to year until the asset is liquidated
  • For tangible assets the value of the asset is amortized or spread out over multiple years
account types2
Account types
  • Liability Accounts (What you owe)– include loans, mortgages, lines of credit, account’s with suppliers, payroll expenses payable, GST and taxes payable, and your accounts payable account
  • Your accounts payable account tracks all of your outstanding bills; tracked by vendor name
account types3
Account types
  • Equity Accounts (Value of the Business)– the difference between what a businesses owns and what it owes
  • Equity accounts include owner or shareholder’s contributions, draws, and retained earnings which are profits left in a business
  • At the end of each year the net profits (or losses) from a business are transferred into the retained earnings or owner’s equity account
account types4
Account types
  • Income Accounts (Revenue)– Revenue or Income is earned through business activities such as the sale of merchandise or services
  • Some businesses earn all their revenue by selling products, others offer services, and many offer both products and services
account types5
Account types

Expense Accounts (The Costs of Running a Business)– Expenses are tracked through 2 main categories; cost of goods sold and operating expenses

The expense accounts will vary between businesses but often are very detailed so that a company can evaluate its profitability effectively


Let’s practice recognizing account types by completing the exercise in your handout on page 3

the chart of accounts
The Chart of Accounts
  • Because each company is different, the types of accounts they have and how many of each type of account they have are also different
  • The Chart of Accounts lists the accounts for a specific business
  • Accounts are often assigned numbers that identify where the accounts are in the ledger or list of accounts
the chart of accounts1
The Chart of Accounts

General Accounting Principle’s state that the accounts be organized in the following manner to create consistency amongst businesses. This order is also useful when preparing financial statements.

  • 1. Assets are listed First; when numbered, begin with the number 1
  • 2. Liabilities are listed Second; when numbered, begin with the number 2
  • 3. Equity Accounts are listed Third; when numbered, begin with the number 3
  • 4. Revenue accounts are listed Fourth; when numbered, begin with the number 4
  • 5. Expense accounts are listed last; when numbered, begin with the number 5 or greater
what are my responsibilities as a bookkeeper
What are my responsibilities as a bookkeeper?

Accounts Payables

  • A/P Transactions record expenses for your company
  • Bills and Cheques are the main ways company’s record expenses. Credit Card transactions are also popular
  • Expenses are tracked by Vendors
what are my responsibilities as a bookkeeper1
What are my responsibilities as a bookkeeper?


  • Inventory is goods on hand which a company intends to sell or use for their services
  • Inventory is a unique type of expense account as it is often referred to as Cost of Goods Sold which measures the direct cost of a company’sincome
what are my responsibilities as a bookkeeper2
What are my responsibilities as a bookkeeper?

Accounts Receivables

  • A/R Transactions record revenue or income for your company
  • Invoices and Sales Receipts are the main ways company’s record revenue
  • Income is often tracked by Customer
what are my responsibilities as a bookkeeper3
What are my responsibilities as a bookkeeper?


  • Payroll are expenses incurred by a company to hire staff
  • Payroll expenses include wages paid to employees as well as payroll liabilities
the trial balance
The Trial Balance
  • A Trial Balance is a list of Accounts and their balances at a specific time
  • In accounting some account types will have a debit balance and others will have a credit balance
  • In the Trial Balance Report the total of all debits will equal the total of all credits
debits vs credits
Debits VS Credits

Assets, Equity Drawings and Expense Accounts:

Debit to Increase Credit to Decrease

Liabilities, Equity Contributions and Income Accounts:

Credit to Increase Debit to Decrease

  • This is so that all journal entries are balanced equations.
general journal entries
General Journal Entries
  • Any accounting entry results in a Journal Entry
  • Most entries in a computerized accounting environment will be completed automatically in the background of the program as the user will enter their information through forms
  • When recording a complex accounting transaction a manual journal entry is completed
  • When completing a manual journal entry you must remember that all debits must equal all credits
general journal entries1
General Journal Entries

The following 5 steps will help you through drafting a manual journal entry:

1. Determine all of the Accounts within your Chart of Accounts that will be effected by the entry.

2. Next determine what type of accounts the identified accounts are.

3. Determine for each account used will the account receive a DEBIT or a CREDIT.

4. For each account determine the amount for the entry.

5. Finally, draft your General Journal Entry

general journal entries2
General Journal Entries

This is a sample General Journal Entry.

The sample entry records a loan payment.

general journal entries3
General Journal Entries


Scenario: Your company purchases a new company vehicle from your local car dealership. You issue the dealership a $10,000 cheque for the down payment on the vehicle and the remainder of the cost is financed through Ford Credit as a vehicle loan.

The cost of the vehicle is $60,000.00 plus $3,000.00 GST.

general journal entries4
General Journal Entries

Step One: Determine all of the Accounts within your Chart of Accounts that will be effected by this purchase; there are 4 in this example.

  • Chequing Account
  • Ford Credit Loan Account
  • GST Paid
  • Fixed Asset – Company Vehicle
general journal entries5
General Journal Entries

Step Two: Now you will need to think about what type of accounts these are.

Account Account Type

Chequing Account Asset (Bank)

Ford Credit Loan Account Liability (Loan)

GST Paid Liability (GST Owing)

Fixed Asset – Company Vehicle Asset (Fixed Asset)

general journal entries6
General Journal Entries

Step Three: Next determine for each account used will the account receive a DEBIT or a CREDIT.

Account Debit or Credit

Chequing Account Credit

Ford Credit Loan Account Credit

GST Paid Debit

Fixed Asset – Company VehicleDebit

general journal entries7
General Journal Entries

Step Four: Now for each account determine the amount for the entry.

Account Amount

Chequing Account $10,000.00

Ford Credit Loan Account $53,000.00

GST Paid $3,000.00

Fixed Asset – Company Vehicle $60,000.00

general journal entries8
General Journal Entries

Step Five: Finally, Draft your General Journal Entry

Account DebitCredit

Chequing Account $10,000.00

Ford Credit Loan Account $53,000.00

GST Paid $3,000.00

Company Vehicle $60,000.00

general journal entries9
General Journal Entries

Here is a sample of what the previous General Journal Entry may look like in a computer software program such as QuickBooks.

reconciling accounts
Reconciling Accounts

Reconciling Accounts

  • Reconciliations should be prepared for all bank accounts and credit card accounts
  • Account Reconciliations keep your accounting records accurate, complete and up to date
  • Bank Reconciliations will help you identify:
    • Outstanding Cheques and Deposits
    • Errors to entries
    • Bank Errors
reconciling accounts1
Reconciling Accounts

Steps to Reconciling Accounts

  • You will need your bank or credit card account statement
  • Enter your Opening and Closing Balances
  • Next you will go line by line, checking to ensure your accounting records from your bank or credit card accounts ledger match your statement
  • Adjust any incorrect entries
  • Enter any transactions that have not yet been entered
  • When your records match your bank statement - your account has been reconciled
goods and services tax gst
Goods and Services Tax - GST

Goods and Services Tax

  • GSTis a type of tax charged by businesses that register for a GST number and meet the eligibility requirements by Revenue Canada for a GST Account
  • See Revenue Canada’s Website for information on whether your business qualifies for a GST Account or not
goods and services tax gst1
Goods and Services Tax - GST

Goods and Services Tax

Assuming your company has a GST Account here are your responsibilities:

  • You must charge your customers and report GST on all taxable products and services
  • You must record and report all GST your company pays on eligible expenses
  • You must prepare and file your GST report and remittance either quarterly or annually, a personalized GST 34 form will be mailed to you by the CRA
  • GST Remittance amounts that are due must be paid within 30 days of the filing period end date to avoid penalties and interest charges
manual bookkeeping options
Manual Bookkeeping Options

Manual Bookkeeping Options

Although most businesses utilize accounting programs such as QuickBooks®, Simply Accounting®, AgPro®, and AccPac® to name a few often small businesses begin by utilizing a manual bookkeeping system

Manual bookkeeping is the paper-based and traditional way of bookkeeping. Business transactions are recorded manually by hand using manual or paper book of accounts, such as journals books, ledger books and worksheets

manual bookkeeping options1
Manual Bookkeeping Options

Manual Bookkeeping Options

  • Many opt for manual bookkeeping because it is cheaper and easier to maintain
  • Double Entry Accounting is a term often references when referring to manual bookkeeping
  • Double Entry Accounting introduces the concept of debits and credits, which means that for every transaction there is something received (debit) and given up (credit), as such, each recorded transaction affects two or more accounts
manual bookkeeping options2
Manual Bookkeeping Options

Below is a sample ledger that could be set up in a notebook or as a spreadsheet.

manual bookkeeping options3
Manual Bookkeeping Options

Here are points to consider when setting up a manual ledger or bookkeeping system:

  • 1. Most businesses have a separate spreadsheet for each month
  • 2. Income transactions are entered as a positive amount and Expense transactions are often entered as a negative amount
  • 3. By subtotalling each column you can check your work and ensure that you balance
manual bookkeeping options4
Manual Bookkeeping Options

Here are points to consider when setting up a manual ledger or bookkeeping system:

  • Separating the GST collected column from the GST paid column makes preparing and filing a GST return simple
  • Remember to only record the Subtotal amount under the income and expense columns
  • You can have as many income and expense columns as you need however often its best to keep it as simple as possible. Columns should not be created for vendors or customers only general expense or income types

Complete the exercise on page 12 of your handout by entering in the ledger below each of the following transactions. As a final task prepare a GST Filing for May 2013.


Prepare the GST filing for May 2013

understanding basic financial statements
Understanding Basic Financial Statements

Income Statement or Profit and Loss Statement  

  • Income Statement or Profit and Loss Statement presents the revenues and expenses, and the resulting net income or net loss for a specific period of time
  • Revenue and Expense accounts are accounted for within a company’s fiscal year and the balances of these accounts are not brought over to future years
  • If you were to look at a Trial Balance Report you would use all Revenue and Expense accounts and their corresponding values to generate an

Income Statement or Profit and Loss Statement

understanding basic financial statements3
Understanding Basic Financial Statements

Balance Sheet

  • A Balance Sheet reports the assets, liabilities, and owner’s equity at a specific date
  • After a company’s yearend is completed all Revenue, Expense and Drawings accounts are cleared as the Owner’s Equity Account is updated
  • A Balance Sheet report summarizes the company’s activity from year to year. The report calculates how much your business is worth (your business's equity) by subtracting all the money your company owes (liabilities) from everything it owns (assets)
  • If you were to look at a Trial Balance Report you would use all Asset, Liability and Equity accounts and their corresponding values to generate a Balance Sheet
understanding basic financial statements6
Understanding Basic Financial Statements


Using the Trial Balance Report from the sample company: White Ridge Construction Company ; fill in the blanks for the Profit and Loss Statement

and the

Balance Sheet



Opening balance equity

Net Income (from P & L) pg 13

year end
Year End

Preparingyour Files for Year End -Whether your accounting files are going to an auditor, tax prepare or accountant here are the documents that you should have in order to prepare for year end.

year end1
Year End

Year End Checklist

¨Accounts Receivables Listing

¨Accounts Payables Listing

¨New Asset Files

¨New Loans Files

¨Bank Reconciliations

¨Revenue and Expense Files

¨Chart of Accounts

¨Sales Tax Files

¨Payroll T4 and Remittance Files

¨Year End Trial Balances from Previous Year and End of Current Year

¨Backup Copy of your computerized Accounting File or Your Manual Ledger/Spreadsheet


Use your Glossary on page 19 of your handout to review the accounting terms you have learned

extra practice
Extra Practice

Prepare a Profit & Loss Statement for April, 2013 using the manual bookkeeping example on page 11