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Bookkeeping Guidebook #363026

Course Overview

Credit

Amount

CPA

Course Author: Steven M. Bragg, CPA Field of Study (CPA): Accounting

Course Description

Course publication/revision date: This course was updated on 7/24/2026.

A startup business or small company may have no formal accounting system in place, which leads to endless difficulties with recordkeeping and producing reliable financial statements. The Bookkeeping Guidebook course eliminates these problems by showing how to set up and operate a double entry accounting system, create journal entries, and record information in a general ledger. With this framework in place, the course also discusses how to issue billings, process cash receipts, calculate depreciation, value inventory, pay employees and suppliers, file tax returns, and produce financial statements. In short, this is the desk reference needed by anyone who wants to create or operate an accounting system.

Table of Contents

Chapter 1 - The Bookkeeper Position1

The Bookkeeper Position	1
Bookkeeper Qualifications	2
The Full Charge Bookkeeper	2
Relations with the Company's CPA	3
The Difference between Accounting and Bookkeeping	3

Chapter 2 - Bookkeeping Basics7

Financial Accounting Basics	7
Accounting Frameworks	8
Accounting Principles	9
The Accounting Cycle	10
Accounting Transactions	11
Types of Transaction Cycles	11
Source Documents	12
Double Entry Accounting	13
The Accounting Equation	13
Journal Entries	15
Major Journal Entries	16
The Accruals Concept	17
The Realization Concept	18
Accrual Basis of Accounting	19
Cash Basis of Accounting	19
Converting Cash Basis to Accrual Basis Accounting	20

Chapter 3 - The Chart of Accounts23

Overview of the Chart of Accounts	23
The Three-Digit Chart of Accounts	25
The Five-Digit Chart of Accounts	27
Chart of Accounts Reduction	29

Chapter 4 - The Ledger Concept32

The Ledger Concept	32
Posting to the General Ledger	33
General Ledger Overview	34
The Accounts Receivable Ledger	35
The Purchase Ledger	35
The Cash Receipts Ledger	36
Reconciling the General Ledger	36
Overview of the Trial Balance	37
The Trial Balance Format	37
The Extended Trial Balance	39
Trial Balance Error Correction	40
The Post-Closing Trial Balance	41
Evaluation of the Trial Balance	41

Chapter 5 - Closing the Books44

Journal Entries	44
The Accruals Concept	44
Adjusting Entries	45
Reversing Entries	45
Common Adjusting Entries	46
Closing Entries	48
Prior Steps: Update Reserves	49
Core Steps: Issue Customer Invoices	50
Core Steps: Reconcile the Bank Statement	50
Core Steps: Calculate Depreciation	50
Core Steps: Accounts Payable	50
Core Steps: Review Journal Entries	51
Core Steps: Reconcile Accounts	52
Core Steps: Close Subsidiary Ledgers	53
Core Steps: Create Financial Statements	54
Core Steps: Review Financial Statements	54
Core Steps: Accrue Tax Liabilities	54
Core Steps: Close the Month	55
Core Steps: Add Disclosures	55
Core Steps: Issue Financial Statements	55
Delayed Closing Steps: Closing Metrics	55
Delayed Closing Steps: Document Future Closing Changes	56
Delayed Closing Steps: Update Closing Procedures	56

Chapter 6 - The Financial Statements59

Income Statement Overview	59
The Single-Step Income Statement	62
The Multi-Step Income Statement	62
The Multi-Period Income Statement	63
How to Construct the Income Statement	64
Overview of the Balance Sheet	66
The Comparative Balance Sheet	69
How to Construct the Balance Sheet	70
Overview of the Statement of Cash Flows	72
The Direct Method	72
The Indirect Method	74
How to Prepare the Statement of Cash Flows	75

Chapter 7 - Interpretation of Financial Statements79

Interpretation of Financial Statements	79
Horizontal Analysis	80
Vertical Analysis	82
Current Ratio	83
Quick Ratio	84
Liquidity Index	85
Accounts Payable Turnover Ratio	86
Accounts Receivable Turnover Ratio	87
Inventory Turnover Ratio	87
Fixed Asset Turnover Ratio	88
Sales to Working Capital Ratio	89
Debt to Equity Ratio	89
Fixed Charge Coverage	90
Breakeven Point	90
Gross Profit Ratio	91
Net Profit Ratio	91
Return on Net Assets	92
Limitations of Ratio Analysis	93

Chapter 8 - Bookkeeping Controls96

Customer Billing Controls	97
Collection Controls	99
Cash Receipts Controls	100
Accounts Payable Controls	102
Expense Report Controls	106
Petty Cash Controls	107
Payroll Controls	108

Chapter 9 - Sales and Collection Activities113

Offering Credit to Customers	113
The Billing Process	114
Additional Manual Billing Steps	116
The Invoice	116
Accounting for Sales Discounts	118
Credit Memo Processing	119
The Credit Memo	119
Cash Sales	123
Remitting Sales Taxes	124
Sales Tax Nexus	126
Economic Nexus	126
Sales Tax Exemptions	126
The Accounts Receivable Aging Report	129
Reconciling Accounts Receivable	129
The Statement of Account	130
Collection Activities	131
Calculating and Recording Bad Debts	133
Direct Write-Off Method	133
Allowance for Doubtful Accounts	134

Chapter 10 - Cash Processing137

Check Receipts	137
Check Receipt Improvements	138
The Bank Lockbox	138
Remote Deposit Capture	139
Cash Receipts	139
Credit Card Receipts	140
Customer Payment Reconciliation Best Practices	141
The Bank Reconciliation	141
The Not Sufficient Funds Concept	144
The Daily Bank Reconciliation	144
The Proof of Cash	144
Cash Overdrafts	145
Bank Reconciliation Problems	146

Chapter 11 - Payables Processing148

The Payables System	148
Supplier Invoice Processing	148
Check Request Form	150
Adjustment Letter	151
The Check Payment Issuance Process	152
Use Tax Payments	153
Expense Report Processing	154
Expense Report Form	154
The Review of Expense Reports	155
Procurement Cards	156
The Procurement Card Reconciliation	157
Missing Receipts Form	158
Disputed Expenditure Form	158
The Petty Cash System	159
Petty Cash Transfer Form	159
Petty Cash Voucher	160
Petty Cash Book	161
Petty Cash Reconciliation	162
Petty Cash Disbursement Process	163
Petty Cash Funding Process	164
Early Payment Discounts	164
Accounts Payable Aging Report	165
The 1099 Vendor	166

Chapter 12 - Inventory Accounting171

The Periodic Inventory System	171
The Perpetual Inventory System	172
Inventory Cost Layering Overview	174
The First in, First Out Method	174
The Last in, First Out Method	176
The Weighted Average Method	177
The Specific Identification Method	178
Estimating Ending Inventory	179
Gross Profit Method	179
Retail Inventory Method	180
The Lower of Cost or Market Rule	181

Chapter 13 - Fixed Assets and Depreciation185

What are Fixed Assets?	185
Fixed Asset Classifications	186
Accounting for Fixed Assets	187
The Capitalization Limit	188
The Base Unit	189
The Initial Measurement of a Fixed Asset	190
The Purpose of Depreciation	190
Depreciation Concepts	191
Accelerated Depreciation	192
Sum-of-the-Years' Digits Method	192
Double-Declining Balance Method	193
Straight-Line Method	194
Units of Production Method	195
Depletion Method	195
MACRS Depreciation	197
The Depreciation of Land	198
The Depreciation of Land Improvements	199
Depreciation Accounting Entries	199
Accumulated Depreciation	200
Asset Derecognition	201
Abandoned Assets	202
Asset Disposal Accounting	203

Chapter 14 - Debt Accounting206

Basic Debt Accounting	206
The Amortization Schedule	207
Reconciling the Debt Account	208

Chapter 15 - Payroll Activities211

Required Government Forms	211
The Employer Identification Number	211
Form W-4	213
Form I-9	215
Selecting a Payroll Cycle	218
Employee Time Tracking	219
Timesheets	219
Time Cards	221
Gross Pay Calculations	222
Work Week	222
Hourly Rate Plan	223
Overtime	223
Commissions	225
Salaries Paid for Partial Periods	225
Deductions from Gross Payroll	226
Social Security Tax	226
Medicare Tax	227
Income Tax Withholdings	227
Benefits and Other Deductions	229
The Benefits Deduction Arrangement	229
Deductions for Payments to Third Parties	232
Charitable Contributions	232
Garnishments Overview	232
Child Support Garnishment	233
Student Loan Garnishment	234
Tax Garnishment	234
Union Dues	235
Deductions for Financing Repayments	236
Net Pay	236
Accounting for Payroll Transactions	237
Primary Payroll Journal Entry	237
Accrued Wages	239
Accrued Bonuses	239
Accrued Commissions	240
Manual Paycheck Entry	241
Employee Advances	242
Accrued Vacation Pay	242
Tax Deposits	244

Chapter 16 - Payroll Taxes246

Types of Tax Deposit Schedules	246
Monthly Deposit Schedule	247
Semiweekly Deposit Schedule	248
Remittance Method	249
Accuracy of Deposits Rule	249
The Form 941 Quarterly Federal Tax Return	250
Federal Tax Deposit Penalties	254
State Tax Remittances	255
Local Tax Remittances	256
FUTA Tax Calculation	256
FUTA Tax Deposits	257
FUTA Tax Payment Timing	257
FUTA Tax Reporting	257
State Unemployment Taxes	257
Form W-2	261
Form W-3	262
Corrections to Forms W-2 and W-3	262
Workers' Compensation Insurance	263

Chapter 17 - Income Tax Filings265

Income Taxes for a Sole Proprietorship	265
Income Taxes for a Partnership	268
Income Taxes for a C Corporation	271
Income Taxes for an S Corporation	273
Tax Reduction Strategies for Small Businesses	276

Answers to Chapter Questions278

Glossary295

Index301

Course Details

Author: Steven M. Bragg, CPA

Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.

Publication/Revision Date: 7/24/2026

Course Exam Questions (online): 75 (multiple-choice)

Program Delivery Method: NASBA QAS Self-Study

Available Formats of Course Text: PDF or PDF plus printed copy sent in the mail

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors ID: 107615

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Cite the responsibilities of the bookkeeper.
Recognize the underlying principles of accounting, and the nature of the accounting cycle.
Identify the situations in which different chart of account structures should be used, and the issues relating to the reduction of the chart of accounts.
Specify the types of subsidiary ledgers, and the uses to which the trial balance can be put.
Recognize the steps involved in closing the books and reviewing the financial statements.
Identify the different formats in which the financial statements can be presented, and the accounts used in each of the statements.
Identify ratios that can be used to interpret the information in the financial statements.
Cite the controls used in the processing of billings, cash receipts, payables, expense reports, petty cash, and payroll.
Specify the documents used in the processing of credit requests, billings, and communications with customers.
State the responsibilities of the parties involved in cash processing, and the causes of errors in that processing.
Identify the situations in which procurement card billings can be called into question, and the types of reimbursements allowed on an expense report.
Cite the reimbursement rules related to expense reports.
Describe the elements of a petty cash system.
Recognize the types of inventory tracking systems, and the methods available for estimating the cost of ending inventory.
Cite the key concepts relating to the calculation of depreciation, as well as the methods of depreciation.
Describe the depreciation rules related to land.
Identify the causes of a loan balance difference in the records of the borrower and lender.
Recognize the government forms associated with payroll activities.
Specify the methods for calculating gross pay and determining income tax withholdings.
Recognize the accounting for payroll transactions.
Recognize the timing of payroll tax deposits, and the penalties applicable to late payments.
Describe how the FUTA tax is calculated.
Cite the forms used by the different types of businesses to report their income tax liabilities.
Describe the loss recognition by partners in a partnership.