The cash-based accounting method is the simplest method, and makes it easier to track your cash flow in real time. You record transactions when the money actually enters or leaves your business, even if they were earned or billed earlier.

Bookkeepers handle the day-to-day tasks of recording financial transactions while accountants provide insight and analysis of that data and generate accounting reports.

The process of bookkeeping involves four basic steps: 1) analyzing financial transactions and assigning them to specific accounts; 2) writing original journal entries that credit and debit the appropriate accounts; 3) posting entries to ledger accounts; and 4) adjusting entries at the end of each accounting period.

In order to keep accurate records, and be able to account for all transactions that have affected your net worth, you need receipts, records, invoices, statements, bill of sales, and market value estimates, for everything that comes into or leaves your possession, for which a dollar value can be assigned.