The Perils of DIY Bookkeeping: Top 5 Mistakes You're Probably Making

There's a reason why bookkeeping is a specialized field – it's not as straightforward as it seems. If you're a business owner trying to manage your books on your own, kudos for your determination. But beware, the road to financial clarity is fraught with pitfalls.

1. The Mystery of the Missing Closing Entries

Year-end comes with its own set of challenges, and closing entries are the grand finale. But guess what? Many DIYers don't even perform them. Closing entries are crucial for resetting your income and expense accounts, preparing them for the new fiscal year.

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2. The Payroll Puzzle

Payroll seems straightforward until you actually do it. Many DIY bookkeepers fail to separate Wage Expense, Payroll Tax Expense, Payroll Tax Liabilities, and Wages Payable. These have distinct meanings and implications for your financial statements.

3. Loans: A Tale of Two Components

When you make a loan payment, you're paying both interest and principal – but do you account for them separately? The principle reduces your loan balance on the balance sheet, while the interest is an expense on your income statement.

4. Sales and the Tricky Trio: Taxes, Tips, and Totals

Recording sales seems easy until you have to segregate sales tax, tips, and the actual sale. Many DIYers lump these together, which is a cardinal sin in bookkeeping.

5. Merchant Service Fees: The Overlooked Culprit

Many DIY bookkeepers fail to properly account for merchant service fees. These fees are an expense – a cost of doing business.

Good bookkeeping is not just about keeping records; it's about maintaining the financial integrity of your business.