Double-Entry Bookkeeping

Bkper is a double-entry bookkeeping system. This guide takes you from the basics of double-entry — and how Bkper interprets it — through choosing accounts and account types, to grouping accounts so you can centralize control of your finances in one snapshot on the balance sidebar.

This is the level of control you can work toward:

Note

This level of detail is not mandatory — you can start with just a few accounts. The colors in the image correspond to the account type colors in Bkper.

Double-entry bookkeeping

How does double-entry bookkeeping work? Each time you make a transaction — like paying someone — you make at least two entries in two different accounts, as the resource goes from one account to another.

What is an account? An account represents a T-balance with a debit (left) and a credit (right) side.

Key principles of double-entry bookkeeping:

• A transaction always consists of a Debit and Credit entry in a book
• Debit and Credit entries are always in two different accounts
• Debit and Credit are always in balance in a book
• To start a book you make balance adjustments to your accounts
• On Debit-balance accounts, debit entries increase the balance
• On Debit-balance accounts, credit entries decrease the balance
• On Credit-balance accounts, debit entries decrease the balance
• On Credit-balance accounts, credit entries increase the balance

A single transaction

The payment by bank transfer of a bus ticket becomes a credit entry on your Bank account and a debit entry on your Expenses account. The bank account decreased and the expenses account increased.

Combining transactions

On a work trip, some expenses are made and at the end of the month the company reimburses them.

First, a pizza for lunch costs $50.00. The credit entry records the amount to be reimbursed (increasing) at $50.00, and the debit entry records the expense increasing by $50.00.

Next, a hotel stay costs $250.00. The credit entry records the reimbursable amount increasing by $250.00, and the debit entry records the expense increasing by $250.00.

The reimbursement of all expenses at the end of the month is done by bank transfer. The credit entry records the Bank account decreasing by $300.00, and the debit entry records the reimbursement on the Collaborator account decreasing by $300.00.

How Bkper represents this

Bkper transactions follow the same bookkeeping principles. When you take the combination of transactions described above and put the account balances together, the Bkper representation matches exactly.

The simplified view of these transactions:

And how they appear in Bkper:

Transactions

Accounts

Starting with accounts

Transactions represent the exchange of resources between two accounts. If you are not familiar with bookkeeping or accounting concepts, start with just a few accounts that represent all your activities. With a few accounts, transaction identification can be done with searchable #hashtags in the description.

As the need for more granularity grows naturally, you can add accounts that make sense for your activities. Add an online payment receivable alongside your bank account, or detail expenses into separate accounts to track their balances during a running period.

Account types

Account types determine if an account appears on the balance sheet or the income statement in the balance sidebar.

Asset (blue) and Liability (yellow) accounts are permanent accounts shown on the upper part of the sidebar — together they represent your balance sheet. Incoming (green) and Outgoing (red) accounts are non-permanent accounts shown on the lower part — together they represent your income statement for a given period.

See also: Permanent accounts, debit and credit balances

With account types assigned, the transactions and accounts look like this:

Transactions

Accounts

Grouping by account type

With accounts that represent financial movements, you can group accounts of the same kind and see their total balance on the sidebar. Group all customer accounts into one group to show the combined customer balance. The same applies for revenue, assets, liabilities, or expenses.

Bkper does not allow grouping Permanent Accounts with Non-Permanent accounts, but you can group Assets with Liabilities to see your Equity, and group Incoming with Outgoing to see your Net Profit for a given period.

Transactions

Note

The group totals on the balance sidebar now show the combined balance of all bank accounts in one place.

Accounts

Grouping permanent accounts

Grouping permanent accounts shows the result of your balance sheet on the sidebar.

Grouping non-permanent accounts

Grouping non-permanent accounts shows the result (net profit) of the selected running period on the sidebar.

Note

• The asset and liability accounts are omitted from the image above for visualization purposes
• Groups that hold accounts from two different types are colored gray in Bkper

With all groupings in place:

Transactions

Note

• The Equity and Net Profit balance totals appear on the balance sidebar
• Permanent accounts are organized on top; non-permanent accounts are shown for the current month below

Accounts

Note

• Permanent account groups and Non-Permanent account groups are colored gray
• An account can be grouped into multiple groups across different hierarchies

Explore this concept hands-on by making your own copy of the advanced concept book.