Lesson 1: Intro to Bookkeeping
Bookkeeping is exactly that, keeping the books. It is essentially specialized data entry. When I was the lead bookkeeper (among other hats) for the million $ organization I used to work for, I spent a lot of time tracking down my co-workers and asking them "What was this expense for?" or "What project was this for?" I annoyed them but it was my job to maintain the books accurately and it was an important job.
When it came time to bill clients, the CFO used the info I entered for the invoices. When it came time to pay vendors, the CFO used the info I entered for the bills. When my co-workers received their M&IE payments or travel reimbursables, the info I entered was used to process those payments. For the company's taxes, our independent tax accountant used the complete set of books to complete the company's returns.
Bookkeeping is all about organization and financial reconciliations! "Balancing the books" = performing reconciliations = entering transactions in an organized way that tells the company story so the books match the official accounts (bank account, cash-on-hand, credit cards, loans, etc). A business has a set of books (Quickbooks for example) that it updates and uses to track financial measures & growth metrics. A business also has a bank account and cash on hand, plus credit cards, loans, and a bunch of other accounts/obligations. It is the Bookkeeper's job to ensure that the business' set of books and the actual accounts match to the penny. If the Quickbooks file says the business has $1,004,567.98 in their bank account but the actual bank account says there's actually only $986,585.21 then the bookkeeper has some data entry to do.
In addition to ensuring the books match the actual accounts, bookkeeping also keeps company's numbers organized. A company with millions or billions in expenses knows exactly how much money they spent on inventory, employee wages, office supplies, etc. because of their bookkeepers. I often use the example of organizing your closet and drawers to reinforce the concept. Do you know how many red shirts you have? What about white shirts? Do you know how many blue collard shirts you have vs blue tee shirts? Probably not but if you had a "clothes bookkeeper" tracking all of this then you would. Anytime you add a new item to your closet or give an item away as donation, your bookkeeper would document which category the item belongs to and update you on your wardrobe status in real time. Financial bookkeeping takes the same concept as the closet example, but with money and accounts instead of clothes and colors/styles.
When you are finished with this course, you will understand exactly how bookkeepers keep the numbers organized. More importantly, you will have a good idea of how you can apply bookkeeping practices to you own life. Click here to continue to Lesson 2 to learn some key terms and concepts that will lay the groundwork for the remainder of the course.