Bookkeeping for Small Businesses Using Google Sheets - Templates Included | Vicky Nedelcheva | Skillshare

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Bookkeeping for Small Businesses Using Google Sheets - Templates Included

teacher avatar Vicky Nedelcheva, Small Business Owner

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

16 Lessons (49m)
    • 1. Introduction

      2:56
    • 2. Who can use Google Sheets for bookkeeping

      3:06
    • 3. More about cash bookkeeping

      4:24
    • 4. Why you should use Google Sheets for bookkeeping

      1:51
    • 5. Chart of accounts

      3:25
    • 6. Quick view of the templates we will create

      2:04
    • 7. Invoice

      2:23
    • 8. Revenue Book

      2:35
    • 9. Expense Book

      2:38
    • 10. Profit and Loss Statement

      5:39
    • 11. Add transaction to the Revenue Book

      3:05
    • 12. Add transactions to the Expense Book

      3:48
    • 13. Understand to read the information on the Profit and Loss Statement

      2:51
    • 14. Bonus 1 - Data Visualization

      2:08
    • 15. Bonus 2 - How to Create a Chart

      3:31
    • 16. Bonus 3 - How to Read a Chart

      2:49
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About This Class

Hi. I am glad that you are interested in my course. Here you can understand a little more about what you can expect from the course:

First, I will clarify which businesses can use cash bookkeeping.

Second, I will explain how the cash bookkeeping cycle works.

After that, I will introduce the Google Sheets templates that we will use for this course. 

I will also go through the invoice template and tell you which functions I’ve used for this template.

Next, I will talk about the chart of accounts and its meaning in cash accounting and how to add it to your Revenue Book and Expense Book in Google Sheets.

Last but not least, I will show you how to set up the profit and loss report to automatically pull information from the Revenue Book and Expense Book.

Once we create the Google Sheets templates, I will walk you through their practical use. This means I will show you how to accurately and effectively record and track your business money-in and money-out using all four bookkeeping templates.

The course will conclude with a video that will show you how to read financial information from your Profit and Loss Statement.

If you are still interested keep watching. I hope this course will be useful for you and your small business.

P.S. You can find the templates attached and download them.

Meet Your Teacher

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Vicky Nedelcheva

Small Business Owner

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Transcripts

1. Introduction: Hi, I am Vicky. I'm a bookkeeper and a bookkeeping code. I show small businesses how to stay on top of their finances. Developing different symbol bookkeeping practices. I help them to get organized and have the best view of their finances. If you are watching this video, maybe you've already decided to try to do the bookkeeping of your own small business on your own. Or maybe you've already made a decision to make a few steps further and start your own bookkeeping business. So this series of videos will be very useful for you. All materials used in this course have been prepared for informational purposes only and are not intended to provide tax or accounting advice before engaging in any action, consult a CPA expert in your location. Now, what is book-keeping? It is just a process of recording and tracking all revenue and expense transactions within a business. But why is bookkeeping so important for the business? It helps businesses get organized and stay on top of their finances. Only this way, business owners can make the right business decisions. Now, a little bit about the content that you can expect in the following videos. This series of videos will focus only on cash bookkeeping, which is applicable for small businesses. Cash bookkeeping is more than symbol. In addition, it requires 0 and asthma and can be done by everyone even if they don't have any bookkeeping knowledge. So let's look at the schedule of this course. First, I will clarify which businesses can use cash bookkeeping. Second, I will explain how the cache bookkeeping cycle is working. Then I will introduce the Google Sheets templates that we will use in this course. Fourth, I will go through the invoice template and tell you which functions I've used for this template. Next, I will talk about the chart of accounts. It's meeting in cash accounting and how to add it to your revenue book and expense book in Google Sheets. After that, I will show you how to setup the Profit and Loss report to automatically pull information from the revenue book and expense book. Once we are ready with the understanding of cash bookkeeping in the technical part of creating Google Sheets templates, I will walk you through the practical use of the templates. This means I will show you how to accurately and effectively record and track your business money in and money out using all four Google Sheets, bookkeeping templates, I will give you some suggestions on how you should make records in your bookkeeping system. Last but not least, I will show you how to read the financial information from your profit and loss statement. As you can see, we have a lot of work. Let's get started. 2. Who can use Google Sheets for bookkeeping: If you choose to work as a freelancer or sole proprietor, you can benefit from Google Sheets and use it to track your accounts. Or if you want to start your own bookkeeping business, but you are completely new. You can start with a few small business clients and do their bookkeeping using Google Sheets. From an accounting point of view, freelancers, sole proprietors, and independent contractors don't need to do double entry bookkeeping. They only have to track their income and expenses and estimate tax payments. This type of bookkeeping system is known as single bookkeeping. It is simple, easy to follow an accurate enough. Since single bookkeeping is cash-based, it records transactions only when money is going in or going out. This information is used when filing Schedule C. It helps small businesses maximize tax deductions and minimize taxes as well. Therefore, managing an effective bookkeeping process is essential for small businesses. No matter if you are a small business owner or a bookkeeper whose clients are small business owners, you should try to save money when you can. You can say from bookkeeping software as you choose to use Google Sheets, it is a powerful tool that simplifies the process of creating invoices, tracking revenues and expenses, and preparing financial reports. This way, you are aware of your own business financial situation. You are well-prepared for tax time and you can make the right business decision in case you use Google Sheets to do the bookkeeping of your small business clients. You will provide them an accurate overview of their finances and help them stay organized and on top of their finances. If you are not sure if Google Sheets is the right bookkeeping tool for you. The rest of the video will help you to find the right answer. If you are a small business owner and don't have employees or have only a few, then you can use Google Sheets as a bookkeeping tool. Logically. If you are a bookkeeper and have small business clients who don't have employees or have only a few, then you can use Google Sheets as a bookkeeping tool. Google Sheets is suitable for businesses that don't need to track inventory as well. The volume of transactions can also affect the choice of a bookkeeping tool. Let's assume your small business only has a few transactions a week. You can definitely use Google Sheets to record them. It's the same if you are a bookkeeper and your small business clients have only a few transactions a week. Let me give you some examples. A small online store that offers digital products or print on-demand items can track its revenue and expenses using Google Sheets. An online instructor who sells online courses, or a coach who sells different coaching programs, can use Google Sheets as a bookkeeping tool to all the businesses I've mentioned. Don't have inventory and have no employees. Of course, these four businesses are only a small part of all examples of small businesses out there. 3. More about cash bookkeeping: Cash accounting is suitable for small businesses that shouldn't track inventory and don't have employees. Let's clarify what cash bookkeeping is and how it works. If you use cash bookkeeping to record your business transactions or the transactions of your small business clients. You should record all money out at the moment they are gone and all money in at the moment they are received. In other words, if you've got a bill for marketing services in October, but you paid the bill in November. You would record those expenses as a November expanse. Let's assume you delivered a service to a client in October, but they paid the invoice in November. According to cash bookkeeping principles, you would record those revenues as a November revenue. Let's see how a cash bookkeeping system of a small business can look like. First, you should create an invoice every time you make a sale. To record the invoice amount as revenue, you have to receive a payment. For every purchase or service you get. You need to get a bell, but you record the amount of the bill. Not at the moment you get the bill, but at the moment when you make a payment to the supplier, when you add revenues and expenses to your bookkeeping records or the bookkeeping records of your clients. You should categorize them. This means that you put each payment made or received into a group. This way, you are, your clients get detailed information about your business finances. Using this detailed information, every small business can stay organized and manage its finances the best way. And always when you as a business owner, need to find some information relating to a particular expense or revenue. You can find it fast. Or when you're small business client asks for some particular financial information. You as their bookkeeper, can immediately answer and provide the necessary information. The difference between total revenues and total expenses is the business net profit. This information needs to be summarized in a report called profit and loss statement. In this report, you clearly see how much the business has earned, how much it has spent, and the difference between the cash inflow and cash outflow. It shows how the business is doing. Based on this profit and loss statement, your tax accountant will help you to file the Schedule C that you need to submit together with your cones 1099. Of course, you have the freedom to choose to use either Google Sheets or bookkeeping software to record and track your revenues and expenses. But in this course, I will show you how you can do your accounts using Google Sheets. In my opinion, this is the best solution for startups and small businesses, especially in the first year. Let's summarize how the cache bookkeeping system works. Every time you get a payment from a client. In case you are a business owner, or when your client gets a payment. In case you are a bookkeeper, you enter the transaction into the bookkeeping records. Once entered, this transaction needs to be categorized to show exactly where the money comes from. Every time you make a payment to a third party. In case you are a business owner or your client makes a payment. In case you are a bookkeeper, you enter the transaction into the bookkeeping records. Once entered, this transaction needs to be categorized to show where exactly the money goes out. To be sure that you've recorded all transactions over a particular period, you need to reconcile the bank statement and your bookkeeping records. The total bank deposit over the particular period should equal the total revenue amount that appears in the bookkeeping records. In exactly the same way. The total bank payments over the particular period should equal the total expense amount that appears in the bookkeeping records. If there is some difference, you need to find the error and correct it. The most important report in the cache bookkeeping system is the profit and loss statement. This is a summary of all transactions that you've entered into the system and shows the business profit. In this video, I've made a quick view of the whole bookkeeping process. I'll walk you through each part of it in the following videos. So keep watching. 4. Why you should use Google Sheets for bookkeeping: If you are doing double entry bookkeeping of a business with many employees and inventory, I would definitely advise you to use bookkeeping software. But when it comes to a sole proprietor or a freelancer, there isn't a better solution than Google Sheets. First, using Google Sheets is completely free. You shouldn't pay any monthly or annual fees. All you need to do is create a Google account. Once done, you have free access to Google Sheets. Second, you can access your Google Sheets files from any device, from any location. Just like each cloud accounting software, you just need an Internet connection, Browser and your e-mail and password to access the file. For example, you are on holiday but you want to enter some data related to your own business or your clients business. No problem. You can do it anytime using either your laptop or your mobile phone. Next, Google Sheets allows sharing documents. On one hand. If you are a bookkeeper, you can give your clients access to the table with their financial information. On the other hand, if you are a small business owner and you are doing your bookkeeping on your own. Maybe you would like an expert to look through your records. Just click the Share button at the top of the screen and that's it. Another advantage of using Google Sheets is the fact that you just set up the tables once and after that, you just enter the data on a daily, weekly, or monthly basis. Based on the formulas you've integrated, Google Sheets displays all the data entered. As you can see, Google sheets provide the most important features that bookkeeping software for sole proprietors are freelancers offers. 5. Chart of accounts: Before we start to create templates, I will explain what a chart of accounts is. A chart of accounts is a tool that bookkeeping uses to record all transactions that happen within a business. Since most sole proprietors and freelancers are doing cash accounting, the chart of accounts is just a bunch of categories that helps bookkeeping divide all business transactions into different groups. As I've already explained, a business that applies this type of accounting, records its transactions when they cause real cash inflow or a cash outflow. To understand the meaning of categories better, I will give you the following illustration. If a business sells three products and offers to services, it would be good if the business creates five separate income categories for each product and service. Usually, the expense categories are more than the revenue categories. Some typical expense categories are advertising, rent, utilities, insurance, telephone, and internet. All these revenue and expense categories are just an example and they can be changed depending on the type of business you're running. Maybe you would ask, why does a business need to group its expenses and revenues when it can just sum them up and have the total values? The answer is, this way your own business or your clients business can get detailed information on where the business biggest revenue comes from and where it spends most of its money. Grouping all transactions helps a business keep track of its revenues and expenses and have detailed information used for decision-making. Transaction categories allow a business to compare detailed financial information between different fiscal periods and find what has caused the difference. I've prepared a very simple example. The total expenses of business I in 2021 are higher than those in 2020. Comparing each expense category, you can immediately find out which expenses have caused this increase. Once you've found out which category has increased, the business owner, no matter if this is you or your client, can make a decision to reduce them. Let's assume you found out that the advertising expenses, how rapidly increased the owner of the business, no matter if this is you or your client, should either negotiate with the advertising agency to try to reduce the price or find a new agency that offers the same advertising services but at a lower price. I would like to share one more reason why transactions should be categorized. Categorizing all business money spent is the most important requirement to pay lower income taxes. The reason is that only some expenses are recognized for tax purposes to know what amount of the expenses can be deducted from the revenue for tax purposes. You need to put them into different categories. And now a little bit about how to add the chart of accounts in your bookkeeping system with Google Sheets. You should create a drop-down menu with revenue and expense categories and integrate them into some of the templates. This way, you will be able to choose the most appropriate category for each transaction. After selecting the correct category for each transaction, all these categories will appear on the profit and loss statements that a business uses to file it's income taxes. 6. Quick view of the templates we will create: In this video, I will quickly walk you through all the bookkeeping templates that we will be using in this course. The first sheet includes an invoice template. As you can see, an invoice created with Google Sheets can also look fancy. The invoice template is editable. It allows you to enter any information you want. You can add information about the seller and customer. You can also write the day in the invoice number. When you add items, quantity, and price per unit, the template automatically calculates the total amount for the particular item. The template automatically calculates the total amount of items, the sales tax if applicable, and the invoice price that the client should pay. Let's see you. The next template we will use. It's called revenue book and includes information for all items or services that you've solved. You need to enter the date, description, amount, and category of each revenue transaction. In the first three columns, you need to manually enter the information. And in the fourth column, you will use a drop-down menu with all income categories. In this table, you will enter all money that comes into your bank account. The third template we will use is called Expense book and includes information for all expenses you make. You need to enter the date, description, amount, and category of each expense transaction. In the first three columns, you need to manually enter the information. And in the fourth column, you will use a drop-down menu with all expense categories. Here you will enter all money that goes out from your bank account. The fourth template is called Profit and Loss sheet. It automatically pulls all the information from the revenue books and expense book and calculates the total gross revenue, total expenses, and net profit. As you can see, the templates are simple but really powerful. 7. Invoice: When it comes to invoicing, I personally believe there are two main points that need attention. The first is the invoice design. The way your invoices look tells a lot about your business and your attitude to the client. The process of invoicing itself is the second I would like to mention. It should be as simple as possible. That's why I was looking for a freeway to create professional-looking invoices. And less than a minute, then I found that Google Sheets is the right tool for these purposes. Google Sheets offers a variety of fonts and colors. You can add an image as while. All these features help you create a stunning appearance of your invoice, Google Sheets offers functions that you can integrate into your invoice and save time in calculating all mounts on the invoice, you only add the quantity and the price per unit. And the invoice calculates automatically the amount that the client owes for the whole quantity of the particular item. When you sell two or more items, the invoice can calculate the total amount that your client should pay after discounts and applying taxes. Let's go through the formulas that are used in this template. The first formula I've integrated into this template is the multiply formula. This formula multiplies the quantity sold of a particular item by the price per unit and shows the result in the amount column. The second formula I've used as the sum formula. It sums up all the numbers in the amount column and shows the total amount. This invoice template automatically calculates the sales tax. I've just used the multiply formula again. This time it multiplies the subtotal amount by the tax per cent. Of course, invoice template calculates the total invoice amount that the client should pay. That's why I've used the sum formula. Again, it sums up the subtotal amount and the tax amount. In conclusion, I can say that the main two formulas used in this template are the multiply formula and the sum formula. Using only these two simple formulas, I've created a completely functional invoice template. 8. Revenue Book: This is a revenue book. The first thing I will show you is how to add a currency to the amount column. There are two ways. The first one is short and the second one is a bit longer. Let's start with the easy part. Select the first cell from that column, and then the dollar icon. To apply this formatting to the rest of the column, we just need to click on the right corner with the selected cell and pull to the route we want. It is possible that your top menu has disappeared. In this case, you should use the second way of adding a currency. Once you've selected the first cell of the column, click on format and the top menu. Select number and click on currency. Now click on the right corner with the plus of the selected cell and pull to the value on. The most exciting part of this sheet is actually the category column. This column allows you to choose one from a few revenue categories. To add this functionality, you need to create a drop-down menu and add all income categories that fit your business. To apply this option, you should take a few steps. Let's get started. Go to data and select Data Validation. In the cell range field, enter the area where the drop-down menu will be applied. To do that, click on the field and after that, select the column where the drop-down menu will appear. In this case, this is the category column of the transaction sheet. From the criteria menu, select list of items and in the right field type all income categories related to your business. Remember, you should separate the categories with a comma. Now Save and that's it. As you can see, all cells of the category column have a small arrow on the right side. And when you click on some of the cells, the drop-down menu appears and you can choose the income category that matches the particular transaction. 9. Expense Book: In this video, I will show you how to create a drop-down menu with categories in the expense book. You've already seen the process of adding income categories into a drop-down menu. Now you should do the same thing, but with expense categories. First, you need to add a currency to the amount column. I am sure you remember what I've shown you in the previous video. Although I will show you one more time to be sure that you will do it right. Select the first cell from the column, and then the dollar icon. To apply this formatting to the rest of the column, you just need to click on the right corner with the plus of the selected cell and pull to the Raul you want. If you want, you can do it the other way. Click on format and the top of the menu. Select number. And after that click on currency. Then click on the right corner with the plus of the selected cell and pull to the Raul you want. Let's move to the category column and add a drop-down menu with all expense categories that fit your business. Only this way you will have detailed information about your expenses and you will be able to deduct your taxes, go to Data, and then select Data Validation. And the salary range field. Enter the area where the drop-down menu will be applied. To do that, click on the field and after that, select the column where the drop-down menu will appear. In this case, this is the category column of the transaction sheet. From the criteria menu, select list of items and in the right field, type all expense categories related to your business. You should separate the categories with a comma. Just click Save to add the drop-down menu. Clicking on the small arrow on the right side of each cell in the category column, the drop-down menu appears and you can choose the expense category that matches the particular transaction. So we are ready with the expense book. In the next video, you will see how to create a profit and loss statement. 10. Profit and Loss Statement: The profit and loss statement shows what your business has made and what it has spent. It compares these two components and calculates if it has made a profit or loss within a particular time range. The information in this report is detailed and you can see where the business money has come from and where your business has spent the most of its money. The profit and loss statement provides this detailed information using a really simple design. It consists only of two columns. And these two columns give you key information. The first one shows all transaction categories, and the second one shows the total amount of each category. The most interesting part is that the profit and loss statement automatically pulls the information from the revenue book and expense book. And in this video, I will show you how to add this functionality. Let's create the formula that will pull over the total amount of each income and expense category and put it into the second column of the profit and loss statement. I will use the sum formula, which is really easy to understand and very powerful at the same time. This formula goes through a range of cells to find those that match a given condition. Then it takes the numbers relating to the match cells and sums them up. There are three arguments in the brackets. The first argument is the range of data that should be evaluated by criterion. In this case, this range is a category column in the revenue sheet or expense sheet. The second argument call criterion, is the condition to be met. In this case, this argument will change for each row, and it will be the category name from which you want to pull information. Let's assume you want to pull information from the advertising expenses. The condition will be advertising. You should be careful and write the categories the same way they appear in the category column in the revenue sheet. The argument called sum range shows the area in which to sum up numbers. This will be the amount column and the revenue book and expense book. Let's see how this formula looks when applied to the revenue categories. This formula says to Google Sheets the following. Look at the cells from D6 to D eight in the revenue sheet and sum up all amounts from the amount column related to the revenue category, shown as a second argument. For each revenue category in the Profit and Loss report. You need to adjust the formulas, you change the conditional argument. The condition for the first revenue category should be sales product 1. The condition for the second revenue category should be sales product to. In the same way. The condition for the third revenue category will be sales product three. Following this logic, you should adjust the formula for all revenue categories. I will use the same formula for the expense categories in the profit and loss statement. But I will add arguments. This version of the formula says, look at the cells from desexed 2008 in the Expenses sheet and some are all amounts from the amount column related to the expense category. Shown as a second argument. For each expense category in the Profit and Loss report. You need to adjust the formulas. You change the conditional argument. The condition for the first expense category should be advertising. The condition for the second expense category should be continuing education. The condition for the third expense category should be subscription. Following this logic, you should adjust the formula for each expense category. Once you've adjusted the formula in all cells from the amount column, you can add total revenue amount, total expense amount, and net income, which is the difference between total revenues and total expenses. To calculate the total revenues and expenses, you will use the sum function. First. Select the cell that will show the total revenues and add the sum formula. Then select all revenue range you want to sum up. To calculate the total expenses. Select the cell that will show this number and add the sum formula. Then select all expense range you want to sum up. To calculate the net income. Use the subtract formula. Select the cell that will show the net income and add the cells you want to subtract. Here. You want to subtract the total expenses from the total revenues. Once all formulas are applied, the information in the profit and loss statement updates every time the information in the revenue book and expense book changes. 11. Add transaction to the Revenue Book: You can make records and the revenue books as often as you want. It depends on what type of person you are and how many revenue transactions you get. If a business gets a few payments every day, then maybe it would be reasonable to enter them on a daily basis. If a business gets a few clients payments a week, then I will suggest you make records into your sales book once a week. And if the business gets a few clients payments a month, then you can enter them into the income book once a month. There isn't a right way and wrong way. Just try different options and see which one works for your business needs. When you record the business cash inflow, you need a bank statement for the period you will enter data. Once you've got it, you can start entering the sales transaction. It is essential to concentrate and work accurately. All bank transactions are in chronological order, exactly the same way you should enter them into the revenue book. First, you write the date of the particular transaction. In description, you can write the invoice number and the name of the client. Then you write the amount that business has received. And of course you categorize the sale transaction. As you can see, you enter one transaction in less than a minute. Just imagine. If you have ten sales transactions per day, you need less than 10 minutes per day to record them. If you have 20 sales transactions per week, you need less than 20 minutes per week to record them. It's not so much time, I guess. These ten minutes of work will help you a lot when tax time comes and you have to file your Schedule C. Once a month, you can reconcile the revenue transactions in the bookkeeping records with the revenues in the bank statement. If the total revenue amount in the revenue bug equals the total revenue amount in the bank statement. Your income transactions are reconcile. If there is some difference, you should find the error and correct it. There are a few common errors that happen very often. Even if you are focused on what you are doing, it is likely to enter a wrong amount for a particular transaction. Another possible error is to enter the same transaction price. Or maybe you haven't entered one or more transactions at all. A very common error is to enter an expense transaction into the revenue book. No matter what the error is, it is important to find it and correct it. You don't need to have worries. It is absolutely okay if you've made some mistake, it is just important to find it and correct it on time. Therefore, reconciling is an essential part of your bookkeeping process. 12. Add transactions to the Expense Book: Similar to the revenue book. You can make records in your expense book depending on what type of person you are and how many expense transactions you make. Your own business or the business of your client pays only a few bills for Internet, telephone, utilities, and websites subscription. You can record them in the expense book at the end of the month. But if we talk about a print on-demand business, every time the business makes a cell, it needs to pay the print on-demand companies to produce the item and send it to the client. In this case, it would be reasonable to record the expenses paid to the print on-demand companies on a daily basis. When the transactions are not so many, you can enter data into the expense book on a weekly basis. There isn't a right way and wrong way. Just try different options and see which one fits your business needs. When you record the business cash outflow, you need a bank statement for the period you will enter data. Once you've got it, you can start entering the expense transactions. Similar to the revenue transactions. You should manually record the expense transactions. That's why it is essential to concentrate and work accurately. All bank transactions are in chronological order. Exactly this way you should enter them into the expense book. First, you write the date of the expense transaction. In description, you can write the bill number and the name of the third party. Then you write the amount you've paid. And of course, you categorize the expense transaction. Be very careful with expense categorizing because this reflects the taxes you should pay. When you accurately categorize your business expenses, You are a few steps further to paying less taxes. As you can see, you enter one expense transaction as fast as a revenue transaction. The process is simple and not time consuming. When you do it regularly, you will definitely have an effective bookkeeping system that allows a business to stay on top of its finances. This way, you or your clients, depending on if you are a business owner or a bookkeeper, can make the right business decisions and improve the business financial situation. And not only this, but such regular bookkeeping records will help you a lot when tax time comes and you have to file a Schedule C. Once a month, you can reconcile all expense transactions you've put into the bookkeeping system with those in the bank statement. If the total expense amount in the expense book equals the total expense amount in the bank statement. The expense transactions are reconciled. If there is some difference, you should find the error and correct it. There are a few common errors that happen very often. Even if you are focused on what you are doing, it is likely to enter a wrong amount for a particular expense transaction. Another possible error is to enter the same expense transactions. Or maybe you haven't entered one or more expense transactions at all. A very common error is to enter a revenue transaction into the expense book. No matter what the error is, it is important to find it and correct it. You don't need to have worries. It is absolutely okay if you've made some mistakes and the expense book. But it is important to find it in correctly and on time. 13. Understand to read the information on the Profit and Loss Statement: Once all formulas are applied, the information on the profit and loss statement updates every time the information in the revenue and expense she changes. If you add a new revenue transaction, this amount will appear on the profit and loss statement and increase the total revenues and the net income. Every time you add a new expense transaction, this amount will appear on the profit and loss statement and increase the total expenses and decrease the net income. For example, if you add a new transaction that shows 1 $1000 income from service one, the total revenues from service one in the profit and loss statement will also increase by $100. Let's see how it works. Go to the revenue sheet and add the new transaction. First, add the date of the transaction, then at the invoice number of the transaction. Now you can write the amount of the cell. In this case, it is $1000. To complete the record, you need to select a revenue category. Let's look at the profit and loss statement. You see that the total revenue of surveys one has increased by $100. The total revenues have also increased. Of course, the net income has automatically increased by $100 as well. The profit and loss statement will update the same way when you add a new expense transaction to the expense book. Let's assume you've paid a $100 monthly rent. You should add this transaction to the expense buck. Start with the date of the transaction. Second, right. The number of paid. Add the amount you've paid, and select an expense category. Now go to the profit and loss statement and see what has changed. The total rent expenses have increased by $800. The total expenses have increased to of course, the net income has also changed and it has decreased by $800. You see how dynamically this profit and loss statement works and how powerful is exactly this is the biggest benefit of Google Sheets as a bookkeeper assistant. 14. Bonus 1 - Data Visualization: Welcome to the first bonus video. Here I will tell you a few words about data visualization and why it is necessary. In the second bonus video, I will show you step-by-step how to add charts to your profit and loss statement. And in the third bonus video, I will show you how to read the information from the chart. Let's get started. We see graphs and charts everywhere on the news, on the front page of the newspaper in the textbook and in many other places. All their data visualization. Data visualization is the representation of information in the form of charts and graphs or other visuals. This is the most accessible way that business owners can use to see and understand trends and patterns in their business. Therefore, businesses often prepared data visualizations in their reports and presentations. Data displayed in the form of a visual tells a story behind the numbers. It tells all the essential moments you need to know to understand your business. Analyzing business information helps owners focus on the areas that require attention. The visual forms help them understand the key points needed for their business. Whether it is a sales report or a purchase report. A visual representation of data helps businesses increase their profits through better analysis and better business decisions. By presenting your revenue and expense data and charts, you can convey the financial information more quickly and effectively. Having your financial information in the form of visuals will help you to easily consume all the numbers you have. It will let you view all your revenue amounts, expense amounts, and trends with a single look. You can use data visualization to ask better questions and make better decisions related to your business. There are a lot of data visualization tools and Google Sheets is one of them. It allows you to display your numbers in the form of different charts with only a few clicks. If you are interested to see how you can create and read a chart with Google sheets. Watch the next two bonus videos. 15. Bonus 2 - How to Create a Chart: In this second bonus video, I will show you step-by-step how to add charts to your profit and loss statement using Google Sheets. It sounds complicated, but it is not at all. You should only know which data range to use and where to find the chart functionality in Google Sheets. The software takes care of all the rest. The information I want to display relates to the revenue and expense categories. First, I want to compare all revenue categories and see which product or service provides the highest income. Second, I want to compare all expenses and see where my business spends the most of its money. To visualize all this information, I will create two separate charts in the profit and loss sheet. To create the revenue chart, I need to select the columns which information I want to display. I go to Insert. And then I click on Charts. I want to change the name of the chart. I go to Customize in the chart editor and select Chart and axis title. Then in the title text field, I write the name. The term that appears is a pie chart. The pie chart is suitable for the data I am visualizing. But in case I want to change it, I go to the chart editor and from the drop-down menu in the Setup section, I choose the type of chart that fits my needs. Although the pie chart fits perfectly with the revenue data, this information can be displayed in the form of other charts as well. For example, I can choose the line chart. It looks good, but I still think that the pie chart is the best solution. Let's see how the revenue information, we'll look in the form of a column chart. The revenue information is easy to read, but I really like the pie chart. Therefore, I will select it again. As you can see, there are a few options to choose from. The first one is pie chart, the second one is donut chart, and the third one is 3D pie chart. Although there is a big variety of charts, I prefer to use the first one. I am ready with the visualization of the revenue information. Now I will create a chart that represents all expenses. I select the column with all expense categories and the column with all expense amount. Then I go to Insert and click on Charts. To change the name of the chart. I go to Customize in the chart editor. I select Chart and axis title. Then in the title text field, I write the name of the chart. In less than a minute. I visualize the whole expense data. Feel free to select another type of chart. You can also customize the look of the charts using the customized section in the chart editor. In the next video. And we'll show you how to read information from charts. If you are interested, keep watching. 16. Bonus 3 - How to Read a Chart : In this third bonus video, I will show you how to read the information from the chart. Let's give a quick look at the revenue chart. Each product or service has a different color and is represented as a part of the whole pie. In addition, the chart shows what percentage of the total revenues is generated by each product or service. The blue part of the chart visualizes the revenues generated by product one. It is obvious that the blue part of the chart is the biggest one. This means that product one has generated the most of the revenues. The chart shows that this product has earned 47% from the total revenues. The second big part of the chart is colored in orange and it represents the revenue generated by service to service 2 has also generated a big part of the total revenues. This service has earned almost 20 percent from the total revenues. Service one is represented in green and it has generated 12% of the total revenue. Product 3 is colored in yellow and it has earn 16 percent from the total revenues. The smallest part of the triad is colored in red and a displays the revenues earned by product to this product has earn 4% from the total revenues. The most profitable item is product 1. Product 2 has earned the lowest revenue. Based on this information, the business can make a decision to stop offering product 2 and concentrate on more profitable products and services. Let's move to the next chart. Each expense has a different color and is represented as a part of the whole pie. In addition, the chart shows what percentage of the total expenses is generated by each expense category. The biggest parts of the chart are colored in orange and blue. The orange part represents the amount the business spends for ran. These expenses are 21% of the total money that the business has spent. The blue part represents the advertising expenses. They have generated 23 percent of the total expenses. The two smallest parts of the charts represent the postage and shipping expenses and legal and professional fees. The shipping expenses are 3% of the total expenses and the legal and professional fees are only 2% of the total expenses. All other expenses are between 4% and 11 percent of the total expenses. You see how understandable the financial information can be using colors and geometric figures. Google Sheets makes the information from the financial reports comprehensive and easy to compare. Data visualization is not something you must do, but it is very useful and will help you to see the trends in your business only with one quick view.