Develop a bookkeeping system
Before we jump into establishing a bookkeeping system, itís helpful to understand exactly what bookkeeping is and how it differs from accounting. Bookkeeping is the day-to-day process of recording transactions, categorizing them, and reconciling bank statements.
Accounting is a high-level process that looks at business progress and makes sense of the data compiled by the bookkeeper by building financial statements. As a new business owner, youíll need to determine how you want to manage your books:
1. You can choose to go the DIY route and use software like Quickbooks or Wave. Alternatively, you could use a simple Excel spreadsheet.
2. You have the option of using an outsourced or part-time bookkeeper thatís either local or cloud-based.
3. When your business is big enough you can hire an in-house bookkeeper and/or accountant.
With so many options out there, youíre sure to find a bookkeeping solution that will suit your needs.
Canadian and American business owners need to determine whether theyíll use the cash or accrual method of accounting. Letís take a look at the difference between the two.
ē Cash method. Revenues and expenses are recognized at the time they are actually received or paid.
ē Accrual method. Revenues and expenses are recognized when the transaction occurs (even if the cash isnít in or out of the bank yet) and requires tracking receivables and payables.
Technically, Canadians are required to use the accrual method. To simplify things, you can use the cash method throughout the year and then make a single adjusting entry at year end to account for outstanding receivables and payables for tax purposes.
American business owners can use cash-based accounting if revenues are less than $5 million USD, otherwise they must use the accrual method. 

Bookkeeping 101
Bookkeeping is something that you either have to learn or outsource when youíre running a business. Luckily, itís possible to learn how to manage your own books and there are a few notable benefits to tackling it yourself.
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