Accounting systems don't need to be complicated, and many small businesses do well with a manual system. Paper and pencil used to be the way accounting was done before the advent of computers. The manual process can be tedious and prone to errors, but it is simple and inexpensive, making it a perfectly good choice for computer phobics or for people that for whatever reason cannot use computerized systems.
Select your journals and a paper with columns, traditionally in light green color. You could have a sales journal where you book all your cash sales, and a receivable journal to book your receivables. Have a separate journal for expenses with columns to identify the types of expense. Usually every month, columns are added up and journal entries are booked to the general ledger, kept separate in a columnar pad.
Once you get lots of columnar papers, you may consider filing them in their own binder: one binder for cash receipts, another one for accounts payable. Small businesses can use only one big binder divided in areas by tabs. The point is to be able to find what you're looking for without spending hours on looking for a specific page.
Keep a running total in your journals and general ledger. For example, a sales journal could have the last column for a cumulative balance of sales so that you have a total at your fingers, on as needed basis.
Once transactions fill out an entire columnar page, it is time to add up all columns and move the totals to the next page to continue booking transactions. Make sure to identify each page with the name of the journal or general ledger. Page numbers can be used too.
Date your transactions in journals and ledgers. The first column of a columnar page is usually reserved for dates, which are crucial when performing reconciliations. For example, if you see a deposit on your bank statement as of a certain date, you should be able to trace that back to a deposit on your cash journal on the same date. A manual accounting system without dates can become a nightmare fast. Don't go there.
Many small businesses use checkbooks as cash journals and that works as well.
-Double check your calculations. -Correct your mistakes right away and recalculate without delays. It's easy to forget to adjust all numbers when an error is found. -Keep the accounting pages in a safe area and make copies of them once every month or quarter so that if you lose them, you have some backup documentation.
- Many small businesses use checkbooks as cash journals and that works as well.
- -Double check your calculations.
- -Correct your mistakes right away and recalculate without delays. It's easy to forget to adjust all numbers when an error is found.
- -Keep the accounting pages in a safe area and make copies of them once every month or quarter so that if you lose them, you have some backup documentation.
Sheila Shanker is a certified public accountant based in California. She writes online courses for professionals seeking CPE hours and has also published the book "Guide to Non-profits: From the Trenches." Her articles have been published in national magazines such as the "Journal of Accountancy," "Architecture Business and Economics" and "Veterinary Economics." Shanker holds a Master of Business Administration.