How to sort bookkeeping foundations questions

Small businesses lose time when they ask the wrong person bookkeeping foundations questions that should be settled from documents, escalated for advice, or treated as business decisions. An hour of an accountant's time is spent on something a delivery note would have settled, and meanwhile a decision that genuinely needed advice gets made by whoever was coding that afternoon.

There are three kinds of question, and they are easy to tell apart once you know the test. One kind you settle yourself from paper you already hold. One kind you must send upward. And one kind is not a bookkeeping question at all, however much it sounds like one.

What to take away

If a document in your possession settles it, it is yours to settle, and sending it upward is slow and expensive.
If it turns on a rule that could differ across a border or change next year, it is not yours, no matter how routine it feels.
A surprising number of questions are neither, and answering them as bookkeeping produces a technically correct entry that solves nothing.

Questions you settle yourself, from paper you already have

Which month does this belong to?

Bank reconciliation difference list

Payment has not cleared
Deposit arrived after cut-off
Charge was never recorded
Unnamed item = your error

Is this deposit a sale?

Can you point to what it pays for?

Yes

Match to document, then code

It is a question, not a sale

This deposit landed in the bank. Is it a sale?

Only if you can point to what it pays for. A deposit can be a customer payment, a refund from a supplier, a transfer from your own second account, a loan drawdown, or the same customer paying twice. Match it to a document before you code it. An unmatched deposit is a question, not a sale.

The books and the bank do not agree. Where do I start?

Not with the balance. Work item by item and produce a list of differences with a name against each: this payment has not cleared, this deposit arrived after the cut-off, this charge was never recorded. The answer to the question is that list. If the list contains something you cannot name, that is your error, and you have found it.

A customer sent one payment covering several invoices and no remittance advice. Record the amount that arrived, allocate what you can support, and leave the remainder visibly unallocated rather than spreading it by guesswork. Then ask the customer. Guessing produces an aging report that is wrong in two directions at once.

I have found an error from four months ago. Correct it with a new dated entry that reverses and replaces the original, so both remain visible. Whether the correction sits in the current period or in the original one depends on whether that period is closed. Never fix it by editing or deleting the original.

Do I need to record a transfer between my own two accounts? Yes, both legs, coded to the same transfer account so that it nets to zero. Recording only one side leaves either a phantom sale or a phantom cost, and the pattern of errors this produces is set out in the guide to common bookkeeping errors.

Questions that are not yours to answer

These turn on rules that vary by place, by entity type and by year. The honest answer to all of them is the name of the person who should decide.

Questions for your accountant

Which accounting basis applies
Is this cost tax allowable
How to write down an asset
Employee or contractor
When is bad debt
Which taxes to collect
How long to keep records

Do not answer these by analogy with another business, and do not adopt a figure from a guide written for a different country. Where a specific rate, threshold or deadline is needed, get it from the authority that sets it, note the date you checked, and put the note beside the entry.

What makes this conversation short is arriving with the books already clean and a written list of the specific transactions in doubt. That list is one of the documents worth keeping alongside the ledger.

Questions that are really about something else

Which software should I use?

Usually this is a question about who is going to do the work, how often, and what happens when that person is unavailable. The package matters far less than whether somebody has a named hour in the week to sit down and do it.

Why is there no money in the bank when the accounts show a profit?

This is not an error to find. Profit measures what you earned and consumed; the bank measures what settled. Between the two sit unpaid customer invoices, stock, loan repayments, owner drawings and anything you bought that lasts. The cash flow statement exists to explain exactly this gap, and it is a better use of an afternoon than re-checking the coding.

How much can I take out of the business?

The ledger can tell you what you have taken and what the business currently owes. It cannot tell you what is safe, because that depends on commitments not yet in the books and on tax not yet due. Treat it as a planning question with an accountant, informed by the ledger rather than answered by it.

Should I be doing this myself?

The real comparison is between the hours you spend now and the cost of reconstructing a year later, which is not linear. Entry is cheap and delegable. The parts worth keeping close are reading the monthly result and knowing which questions you have parked.

Can I catch up eleven months in January?

You can produce something. What you cannot produce is a set of books, because half of what makes an entry correct is a memory that has already gone: what that payment was for, whether that job was delivered, which invoice that round-sum payment covered. What comes out of a January catch-up is a plausible reconstruction, and the difference matters the first time anyone asks a question about it.

The thirty second test

Ask three things in order, and stop at the first yes.

The thirty second test

Can I settle this from a document I hold?

Yes

Recording: do it now, attach document

Does it turn on a changeable rule?

Can I settle this by looking at a document I already hold?If yes, it is recording. Do it now and attach the document.
Does it turn on a rule that could change, or that differs by jurisdiction or entity?If yes, it is advice. Write the question down with the document and send it.
Would answering it change what I do rather than what I record?If yes, it is a business question. The books are an input to it, not the answer.

Anything that fails all three is usually a question about a report rather than an entry, which is where the profit and loss statement and its subtotals earn their keep.

Common questions

What if I am not sure which kind a question is?

Treat it as recording, park the item in a clearly named holding account, and write the question down. That way the transaction is visible, the evidence stays attached, and nothing is guessed while you wait for an answer.

How many open questions is too many?

Age matters more than count. Ten items raised this month is a working process. One item raised in March and still open in September means the loop is not closing, and it will be closed by guesswork at the year end.

Is it worth asking an accountant something small?

Ask in batches. A single list of eight short questions with the documents attached costs a fraction of eight separate conversations, and it produces answers you can write into your own procedures and reuse.

Should I write the answers down?

Yes, with the date. An answer that lives in an inbox gets asked again next year. An answer written into your account definitions changes how everyone codes from that day on.