
So, you want to learn bookkeeping - Tomte
http://www.dwmbeancounter.com/tutorial/Tutorial.html
======
atria
If you don't know the basics, how to do you know when your accountant or
bookkeeper is making a mistake, or giving you bad advice? How to do you know
if they are optimizing their advice to make their jobs easier, not yours?

I stared an LLC last year. It it took two months to find an anchor client, and
they started paying net 60 (so no income for four months). Compared to the
year previous, my income effectively dropped 25%. The accountant figured
estimated payments that would require me to pay every penny I made during the
first half of the year. That would mean 6 months without income. He was simply
taking last year's tax obligation dividing it by the number of quarters left,
not the actual tax obligation. Did I mention he talked me into an LLC because
the administration was simpler? He forgot to mention how much more in taxes I
would be paying compared to an S Corp.

I'm now reading every tax book I can get my hands on, and am reading
accounting textbooks. No one will watch out for your money like you should.

~~~
cstejerean
How are you paying more in taxes for an LLC compared to an S Corp?

~~~
cullenking
The other two replies are incorrect (I have up until this year run our
business as an S-Corp).

With an S-Corp, you pay your owners a reasonable salary. $50-70k is reasonable
for our field according to our CPA. Any profits or losses from the business
pass through to your personal income tax via a Schedule K1. The profits are
taxed like normal income, they are _not_ taxed as capital gains.

The tax savings come from the fact that the distributions you draw from the
profits of the company are not subject to FICA (medicare, social security).
This saves you upwards of 13%.

If you draw more than your profits for the year (say you run an accrual method
of accounting, not cash, so you recognize revenue after services have been
fully rendered, rather than when the cash comes in and you can have a large
bank balance but no profit for that year), the excess is essentially double
taxed with capital gains. A painful mistake, so track your AAA appropriately
:)

~~~
atria
Interesting. When I ran my S Corp, my goal was to avoid estimated tax
payments. At the end of the year, the accountant would calculate the required
taxes and I would issue a "net zero" check that only paid taxes, or a bonus
check with a enormous withholding. The remainder was taken out as a dividend.

Taxes paid via withholding are treated as if they are paid in through the
course of the year which avoids estimated tax payment penalties.

~~~
cullenking
Yeah, I just do the quarterly estimated payments. If your business is constant
(not growing) it's easy to handle via extra withholdings. If you are growing,
they at least make it easy so that if you pay an estimated tax that matches
the prior years tax owed (paid quarterly) you avoid any penalties, even if you
have to make a lump payment to settle up the difference when you do your taxes
at the end of the year.

We have a pretty sophisticated business intelligence platform written in R
that gets us estimated revenues within 10%, so I know how to budget through
the year for taxes owed. I just pay my known quarterlies and keep enough in
the bank to handle the remainder at year end.

------
seanc
This was the blog post that finally unlocked double-entry for me:

[https://martin.kleppmann.com/2011/03/07/accounting-for-
compu...](https://martin.kleppmann.com/2011/03/07/accounting-for-computer-
scientists.html)

~~~
csense
Good article, I submitted it here:
[https://news.ycombinator.com/item?id=11240888](https://news.ycombinator.com/item?id=11240888)

~~~
tantalor
Refer to
[https://news.ycombinator.com/item?id=2298471](https://news.ycombinator.com/item?id=2298471)
(5 years ago)

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dontscale
Accounting is the language of business. If you go into business, you should
either know it or be willing to learn. It's not good enough to have someone
specialize in it for you unless you want to be handed your ass when it comes
to anything regarding business valuation--which concerns more than raising
capital and m&a. For a business with resources, capital allocation is perhaps
the most important concern and accounting is the toolset you work with.

~~~
TheOneTrueKyle
Could you elaborate more on why it is not wise to have someone specialize in
it for you? I can certainly see how knowing accounting can help when going
from MVC to capital. At what point should you rely on someone who is more
knowledgeable in accounting?

~~~
dontscale
It's wise to work with accountants, but it's not enough. There are a lot of
characters in business, and in order to know when they're full of shit
(because sometimes _they_ don't even know), you need to know how to count
beans by the rules.

For example, a public company might report itself as profitable for some
period based on operating earnings alone. But, you read their annual report
and see they took a loss after tax with some extraordinary items. If you don't
know what that means, then you don't know what it means--It really means they
didn't make any money for the period, but they're going around talking about
it like they did. I should mention that's all elementary stuff--there exists a
whole field called "Forensic Accounting" where accountants work to spot fraud
in financial reporting.

And small business owners can get mixed up too. They talk about their big
revenues but don't mention they have a lousy 5% net margin. It can extend
beyond trying to bullshit you--they can get into the habit of bullshitting
themselves thinking they're ballers.

------
rdl
I think there's probably room for a great one day course (interactive,
examples, etc.) to show tech people starting businesses the important points
of law, finance, management, etc. Positive and negative examples (so people
internalize the need), followed by principles, followed by clear guidelines,
and some sample policies.

It's way more effective for me as a learner to understand "why" first, then
the specifics of how -- most accounting, law, etc for non-experts is presented
as hard/fast rules on what to do, with no real motivation.

~~~
kfk
I think you should make it at least 1 day per topic. I can surely give you a
great introduction to business finance in one day. Even though some sort of
support mechanism is needed so that you retain the material learned (say email
support for 3 months or similar).

On another note, reading few VCs blog and how many of them try to teach basics
of financial statements in their blogs, this seems to be enough of a problem
that they would be very happy with founders taking a good course in finance.

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fefifofu
I'm in the "definitely do not learn bookkeeping" camp. Even to many
accountants, bookkeeping is different than accounting.

Bookkeeping is the data entry of accounting - degree or professional
designation are not required.

Accounting is taking the data and trying to reflect an accurate story to the
financial statement reader - the data visualization.

Finance folks are readers of financial statements, where you interpret the
data viz to make decisions. Business owners should be readers too. The
decisions regarding working capital, capital structure, budgeting, etc. are
the important parts. Not debits and credits.

It does help finance and business owners to learn accounting, but bookkeeping
is a step too far - especially when there is many other higher priority things
to learn. To put it in a tech analogy: a Python dev could learn C to gain a
better understanding, but assembly is step too far.

~~~
tryitnow
I disagree. And I agree. What I disagree with is that you shouldn't learn
bookkeeping. I agree that you should learn accounting.

The problem is that you do need to know the basics of bookkeeping to learn
accounting.

And seriously, learning bookkeeping takes maybe one or two weekend and you
will use what you've learned the rest of you business and professional life.

If you can't commit at most two weekend of your life to something as important
as the basic building blocks of finance and accounting, then you probably
shouldn't consider running your own business.

And yes, bookkeepers and accountants will cheat you. The stories are numerous.
And the marks are always executives and entrepreneurs who never bothered to
learn bookkeeping and accounting.

Finally, basic bookkeeping knowledge (as expressed in this tutorital) is
crucial for making informed evaluations of accounting software (which is
honestly going to do most of the actual 'bookkeeping' for you).

~~~
fefifofu
Bookkeeping is the wrong place to start learning the basic building blocks of
finance and accounting. It's too detailed and step-oriented. You should start
at the high-level of reading financial statements and dig deeper as you go.
Try to see how financial statements flow by using everyday concepts.

If you are trying to spot mistakes an accountant made, you won't spot it by
going through accounting entries. If you are trying to see how your business
is doing, you won't know from knowing debits and credits.

You can spot an accounting mistakes or see how your business is doing by
comparing the financial statements to what you are seeing in the business in
real life. "Why is my net income look great, when the cash in the bank is so
bad?" Or, "why does my cash in the bank not match the cash in the financial
statement?". By asking these questions you learn accounting much more
effectively. And your accountant should be able to explain that to you
convincingly and in detail - if not get a new accountant (In fact, it is best
practice for corporations to switch accountants every 4 years or so to catch
mistakes).

~~~
rahimnathwani
The accounting equation, and theory underpinning book-keeping, is the right
place to learn about accounting. But this is literally an hour's work.

I agree that you don't need to learn how to 'do book-keeping', in the sense of
knowing your way around the UI of some specific accounting software.

But, unless you spend that first hour, you will need a _lot_ of explanation
from your accountant in order to understand why income != cashflow. If you
_have_ spent that hour, then your accountant simply needs to tell you: "your
'accounts receivable' went up, as you haven't converted those invoices you
issued into actual cash". Actually, they wouldn't need to even tell you this,
as it would be obvious from the balance sheet.

------
pinky07
A fun and dynamic blog to understand accounting for entrepreneurs:

[https://www.odoo.com/documentation/functional/accounting.htm...](https://www.odoo.com/documentation/functional/accounting.html)

(part of the Odoo documentation, an open source accounting software)

------
MattRogish
"So you want to learn bookkeeping?" No. No you really shouldn't. This is
commodity, undifferentiated work and will potentially cost you hours (or tens
of hours) per month. If you are a business making any sort of money you should
go hire someone like Bench.co to do this for you.

~~~
mrestko
It's funny, this is the exact opposite advice I've heard from most business
owners. They all have recommended learning enough accounting to make sure that
you understand what's going on with your books so that you're never fully
trusting someone else to handle your money.

~~~
forgetsusername
> _It 's funny, this is the exact opposite advice I've heard from most
> business owners._

Because a substantial portion of HN considers all parts of a business, besides
the product, a waste of time. Marketing? Finance? Human Resources? That's for
the plebs who can't program. Meanwhile, this place consistently features
debates conflating balance sheets and income statements, revenues and profits.

Seriously, if you a considering starting or running a business, and don't
understand the foundations of book-keeping as laid out in this tutorial, you
should feel bad. It's not like you require a two-year diploma; understand the
basics.

------
thinkingkong
If you’re looking for a handful more resources
[https://bench.co/syllabus/](https://bench.co/syllabus/) is a decent start.

------
graeme
Can anyone recommend a good Canadian/Quebec alternative to Bench? I'd love to
use them, but they're US only.

------
aggieben
As someone who started a business structured as an S-Corp and running it
without a professional bookkeeper, I found this site immensely helpful.

I do have a tax advisor, but I was on my own for day-to-day bookkeeping. It
was well worth it to spend a few hours on this site absorbing as much as
possible.

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CamperBob2
There's an amusing bit of Javascript in that page to cause it to print as a
single blank page. Never seen that particular "dark pattern" before. At some
point, he appears to have commented it out and replaced it with a single CSS
statement that does the same thing.

~~~
Nadya
Which only serves to prevent the technically unsavvy. In Firefox: Shift+F2
"screenshot --fullpage" then print the screenshot of the page.

I've also never seen someone do that before, good spot.

What's interesting is that the CSS media query doesn't work for older
browsers. So users using IE7/IE8 can still print the pages.

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jheriko
i've always done my own paperwork and filled out the ol' tax returns and
company returns.

the biggest difficulty i have is the language, which wastes much of my time in
google wondering what these /stupid/ terms mean when they involve concepts we
learn at a very young age and nothing complicated at all...

i'll be bookmarking this and trying to drill it into my head to avoid it...
but i still find it sad that there is an entire industry around accurate
counting, summation and trivial sums propped up by red-tape and confusing
language.

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agumonkey
offline for right now, archive =>
[http://archive.is/rHh8q](http://archive.is/rHh8q)

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vonseel
I'm having flashbacks of undergrad.

