How to Do Bookkeeping for Sole Proprietor: Explained
You know already how important it is to keep accurate financial records, especially for a sole proprietor. I mean if you are a sole proprietor you already know the challenges you face every day. Any sole proprietor is personally responsible for the personal assets and business debts. Therefore, bookkeeping for sole proprietor is a necessity. Keeping a separate record will help them to maximize deductions while reducing income tax liability. Now the question here is how to do that;
- You must have a separate record for credit and debit card transactions of the business. Also, you must consult with an experienced accountant or someone who can advise you on bookkeeping system and tell you how to make financial statements as well as determine tax liability.
- You should use paper accounting ledgers. Well, accounting software is there too for assistance. There you must include income accounts to keep a record of the things you sell, interest your business is making and revenue generated from the services. Note that your expense accounts should either be fixed, variable or simply discretionary, including accounts to categorize things such as the cost of materials, rent, and other related services. Also, you must have an account for liabilities, including taxes and loans.
- Enter balances for both assets and liabilities right at the beginning of the accounting period. Things like inventory, equipment, your bank and credit card accounts are quite valuable and these must be added to the books.
- You may consider using double-entry accounting system. This means that all the actions in the book will have a matching or balancing transaction. Say suppose, when you are writing a check for your phone bill, it should be recorded as decreasing checking account balance.
- Additionally, it is extremely important to keep on updating your books while reconciling on a regular basis to have a tab on the present financial situation.
If you want don’t want to put your head into bookkeeping, you can always turn to our services. Our experienced professionals will get it done for you, letting you concentrate more on your business.
