What is bookkeeping?
Bookkeeping is the daily record of every sale, bill and payment, kept in a ledger so the numbers can be trusted later.
Bookkeeping is the daily record of what comes in and what goes out. The Bureau of Labor Statistics says bookkeepers compute, classify, and record data to help organizations keep complete and accurate financial records. In plain terms, every sale, bill and payment lands in a ledger under the right label, so a number you read in March still means something in December.
Recording is one job and interpreting is another, and the split between the two jobs is worth knowing before you hire anyone. Newer readers can start with the beginner answers and branch out from there.
What gets recorded
Three things go into the ledger: money coming in, money going out, and the paper behind both. The IRS puts it this way: purchases, sales, payroll and other transactions generate supporting documents that hold the information to record in the books. In the usual case the same agency says to keep those records for three years.
The shape of the work changes with the business. A Shopify store makes the point well. Its Payments activity report shows a breakdown of transactions, fees and payouts for a chosen date range, and the money itself is transferred to the payout bank account that was set up with Shopify Payments. That gap between sales and payouts is why how online sales reach the ledger gets its own answer. A café has a till, tips and food cost, so keeping books for a café looks different again. With more than one company, keeping each business separate matters from the first day.
Doing it yourself or handing it off
A spreadsheet can work. The IRS says you may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Most people end up in accounting software such as QuickBooks Online, where each sale and bill goes into the ledger as it happens.
Which accounting software to start with depends on whether you sell online, serve food or run several companies. A shop that ships products needs ledgers that handle online sales, and a tight budget points to free plans that work.
Handing the work to a person is the other route, and what a bookkeeper costs each month depends on how much there is to record. Whoever does it, one habit holds the ledger together: a monthly bank check that matches the ledger to the bank statement.
Common questions
Is bookkeeping the same as accounting?
No. Bookkeepers compute, classify, and record data to help organizations keep complete and accurate financial records, and accountants and auditors prepare and examine financial records.
Do I need software to keep books?
No. The IRS says you may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Software mostly saves typing.