What is bookkeeping? 21 tips for business owners

By QuickBooks - Feb 2025.

When you think of bookkeeping, you may think it’s all just numbers and spreadsheets. That’s not exactly the case. Bookkeeping is the meticulous art of recording all financial transactions a business makes. By doing so, you can set your business up for success and have an accurate view of how it’s performing.

So, what is bookkeeping? And what are the benefits? Let us walk you through everything you need to know about the basics of bookkeeping.

• Overview: What is bookkeeping?

• 2 types of bookkeeping for small businesses

• Bookkeeping vs. accounting: What’s the difference?

• What does a bookkeeper do?

• 3 key benefits of bookkeeping

• 3 disadvantages of bookkeeping

• Bookkeeping best practices

• Should I do my own bookkeeping? 3 questions to ask yourself first

• Ready to get started?

Overview: What is bookkeeping?

Bookkeeping is the process of tracking and recording a business’s financial transactions. These business activities are recorded based on the company’s accounting principles and supporting documentation.

Examples of these documents include:

• Bills

• Receipts

• Invoices

• Purchase orders

Business transactions can be recorded by hand in a journal or an Excel spreadsheet. To make things easier, many companies opt to use bookkeeping software to keep track of their financial history.

Bookkeeping is just one facet of doing business and keeping accurate financial records. With well-managed bookkeeping, your business can closely monitor its financial capabilities and journey toward heightened profits, breakthrough growth, and deserved success.

2 types of bookkeeping for small businesses

When it comes to bookkeeping, there are two main types: single-entry bookkeeping and double-entry bookkeeping. Follow along to learn more about which method might be best for you and your business.

1. Single-entry bookkeeping

The single-entry bookkeeping method is often preferred for sole proprietors, small startups, and companies with unfussy or minimal transaction activity. The single-entry system tracks cash sales and expenditures over a period of time. 

With this bookkeeping process, you must maintain three pieces of documentation:

• Cash sales journal: This is where the business records all revenue.

• Cash disbursements journal: This is where the business records all expenses.

• Bank statements: All journal entries should align with the business’s bank statements.

In these documents, transactions are recorded as a single entry rather than two separate entries.

2. Double-entry bookkeeping

Double-entry bookkeeping is the practice of recording transactions in at least two accounts, as a debit or credit. When following this method of bookkeeping, the amounts of debits recorded must match the amounts of credits recorded. This more advanced process is ideal for enterprises with accrued expenses.

The following documents are required for double-entry bookkeeping:

• Journal entries

• General ledgers

• Inventory

• Cashbooks

• Accounts payable

• Accounts receivable

• Loans

• Payroll

The double-entry system of bookkeeping is common in accounting software programs like QuickBooks. With this method, bookkeepers record transactions under expense or income. Then they create a second entry to classify the transaction on the appropriate account.