Part 5 of “What does a Bookkeeper really do?” Coding Transactions

I know the idea of coding your transactions can be scary, but it just takes a little practice. That is what your Bookkeeper is for, you just need to understand the basic “why?” all things are coded and that will make it a little easier to understand.

All transactions that your business does, whether it is an invoice you send to a customer, payments you receive, bills you pay, equipment you buy are all divided into categories. 

If you will notice in the “Accounting Equation Cheat Sheet” 

Assets – Are what you OWN- so any of these things are coded to the asset category with sub- categories for what they are such as cash in the bank, computer, furniture etc.

Liabilities- Are what you OWE- so anything you owe is coded as a liability with a sub-category titled what it is: loans, bills I still owe, taxes I owe.

Equity- Is what’s left OVER- those items a considered Equity, such as Profits.

By placing all the transactions under the correct category, it allows you to understand based on reports the health of your business. You can see if there are areas you could be doing better or see which product or service your best money maker is. It helps you make better decisions for your business.

This is one of the most valuable services a great Bookkeeper offers to your business. Contact me to discuss how I can help you.