How do I do my own small-business bookkeeping?

The DIY bookkeeping system, in four parts

Doing your own books is legal and common. IRC §6001 makes every person liable for tax keep the records the IRS prescribes, and Publication 583 accepts any recordkeeping system that clearly shows income and expenses. What the system has to produce is fixed: the books must show gross income, deductions and credits.

1. One account used only for the business, so the bank statement is the first draft of the books.
2. A chart of accounts whose categories match the lines of the tax return the business files.
3. Every transaction recorded and categorized, with the receipt or invoice kept behind it.
4. Every bank, card and loan account reconciled to its statement each month.

Everything else in this guide is detail on those four. Excite Tax's reason for insisting on all four is practical: records show whether the business is improving, which items are selling, or what changes are needed, and the return is only as good as the books under it.

First: one business account, and everything through it

Publication 583 says to open a business checking account and keep it separate from your personal account, and for most small businesses the business checkbook is the main source for entries in the books. If every business dollar goes in and out of one account, the monthly statement lists almost every transaction you need to record.

• Deposit every business receipt in the business account, and note what each deposit is: a sale, a loan or money you put in.
• Pay yourself by transfer, and book it as an owner draw, never an expense; a sole proprietor can't deduct personal withdrawals.
• Avoid checks or withdrawals made out to cash; when cash is unavoidable and there is no receipt, write down what it was for at the time you pay.
• Add a business credit card if you need one, and use it the same way: business only.

Already mixing? See can I use my personal bank account for my business for how to separate the accounts without losing a year of history.

Second: a chart of accounts that matches the return

A chart of accounts is the list of categories every transaction is sorted into. In the IRS's own words, a ledger holds the totals from the journals, organized into accounts, and in a full double-entry set those accounts cover income, expenses, assets, liabilities and net worth. Excite Tax's rule for naming them: copy the return. If the category names match the return's lines, the year-end totals drop straight onto it.

Add the non-expense accounts next: the bank account, the credit card, any loan, owner contributions and owner draws. An S corporation or a partnership sorts into its own return's lines instead, and the whole setup is in how to set up a chart of accounts. The return also asks which method the books use: cash, accrual or other, and most individuals and many sole proprietors with no inventory use the cash method. The trade-offs are in cash vs. accrual accounting.

Third: record every transaction, with the paper behind it

The IRS says it is generally best to record transactions daily, and that expenses not recorded when they occur may be forgotten when the return is prepared. Daily is ideal; Excite Tax treats once a week as the realistic floor for a DIY owner. Each session is the same: pull in the new transactions, give each one a category, and attach the document.

The documents are what prove the numbers. For expenses, Publication 583 lists canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips. What to keep, and for how long, is in do I have to keep every business receipt and what records the IRS requires.

Is it a business expense?

To be deductible, an expense must be ordinary (common and accepted in your field) and necessary (helpful and appropriate for your business). When a cost is partly personal, separate the personal part from the business part; the personal part is generally not deductible.

Publication 334's worked example: 16,000 business miles out of 20,000 driven makes 80% of the van's operating cost a business expense. The same arithmetic works for a phone: a $90.00 monthly bill paid from the business account and used 60% for business is $54.00 of phone expense and $36.00 of owner draw, because the personal part is generally not deductible.

Fourth: reconcile every account every month

Publication 583 says to reconcile the checking account each month, so the statement, the checkbook and the books agree. Do the same for every savings account, credit card, loan and payment processor. A statement rarely matches the books to the penny on its own: bank charges not yet entered, deposits made after the statement date and checks that had not cleared all make honest differences.

The $15.00 fee then gets entered in the books, and the adjusted bank balance should equal the adjusted book balance. If the two still differ by any amount, something was recorded wrong or not at all, and the month is not done until it is found. The full method is in what is a bank reconciliation, and the rest of the monthly routine is in the month-end close checklist.

The core tasks by week, month, quarter and year

The quarterly row matters more than DIY owners expect: estimated tax payments are generally required if you expect to owe $1,000 or more, self-employment tax included. For a calendar-year business, whose books run January 1 through December 31, that makes the 15th of April, June and September and the 15th of the following January four dates the books should be current by. The year-end list is in the year-end bookkeeping checklist.

Single-entry or double-entry?

Single-entry is the simplest to maintain; double-entry has built-in checks and balances for accuracy and control. In double-entry, every transaction is a debit in one account and a credit in another, and total debits must equal total credits. Publication 583's own example is a rent payment, shown below.

Most bookkeeping software keeps double-entry books behind the screen, so most DIY owners use double-entry without writing a journal entry by hand. The full comparison is in single-entry vs. double-entry bookkeeping.

Bookkeeping best practices, written as policies

A bookkeeping policy is a rule written down once so it is not decided again every week. Excite Tax suggests a single page, kept with the books, that answers these:

• Which account and which card are the business's, and the rule that they are used for business purposes only.
• How the owner is paid: a set transfer, on a set day, booked as a draw (or payroll, for an S corporation owner who works in the business).
• Where receipts go the day they are received: one folder, one app or one email address, never a pocket.
• How long records are kept: the IRS says 3 years in general, 4 years for employment tax records and 7 years for a bad-debt or worthless-securities loss.
• Which accounting method the books use, and that it is the same method as the return.
• The day each month the reconciliation is finished, and who checks it if someone else keeps the books.
• Any purchase above a set amount is recorded as equipment, not an expense, and flagged for the return.

Bookkeeping for beginners and people who are not good with numbers

Bookkeeping for non-accountants is a filing job, not a math job. Software needs very little knowledge of bookkeeping and accounting, and it adds the columns. What it cannot do is know that a deposit was a loan or that a charge was personal; its records must still reconcile with the books and the return.

• Get it off your brain: a recurring calendar block each week for entries and one each month for the reconciliation, the same day and time.
• Keep a one-line note on anything odd the day it happens, such as a refund, a loan draw or a cash purchase; memory will not have it in April.
• Let the software suggest categories, then check them; a rule that sends every hardware-store charge to supplies will also send the personal ones.
• Judge the month by one question: does every account match its statement? If yes, the books are in good shape even if the reports feel foreign.

For the tool itself, see which bookkeeping software a small business should use or bookkeeping in Excel.

Common problems when owners do their own books

• Loans and owner money booked as sales, which overstates income; the source of every deposit is what prevents it.
• Owner draws booked as expenses, which understates income; a sole proprietor can't deduct personal withdrawals.
• Sales recorded net of card-processor fees, so neither the sales nor the fees match the processor's year-end report.
• A reconciliation skipped for a few months, then done by forcing the difference into a catch-all account.
• Big purchases expensed when they belong on the balance sheet, a line that carries forward rather than closing.

Most of these can be fixed later, at a cost. The fixes are in how to clean up messy books, and a business already months behind should start with how to catch up on bookkeeping.

When doing it yourself stops working

The signs are the same each time: reconciliations more than a month behind, payroll or sales tax added to the mix, a second business or entity, a lender asking for statements, or bookkeeping hours that would be better spent on paying work. Whether to hire at that point is its own question, answered in do I need a bookkeeper and how to choose a bookkeeper; what Excite Tax does is on the bookkeeping services page.

In Utah

A Utah business that collects sales tax holds it for the state, so it belongs in its own liability account, not in sales. Returns are due the last day of the month after the filing period, and the filing period depends on the business's liability: quarterly at $50,000 or less of annual sales-tax liability, monthly from $50,001.

A Utah employer adds the withholding calendar: TC-941E returns are due April 30, July 31, October 31 and January 31. Both calendars are reasons to keep the books current monthly rather than once a year; the payroll side is in payroll and bookkeeping coordination.

When to hand this to a preparer

Hand the books over when keeping them costs more hours than the business can spare, or when they stop agreeing with the bank.

Excite Tax keeps these books; the return they feed is reviewed and signed by a licensed CPA at TBD CPA LLC.

Sources

1. IRS Publication 583 (12/2024), Starting a Business and Keeping Records · retrieved September 2026
2. IRS Publication 334 (2025), Tax Guide for Small Business · retrieved September 2026
3. 26 U.S.C. § 6001, Notice or regulations requiring records, statements, and special returns · retrieved September 2026
4. IRS, Schedule C (Form 1040) 2025, Profit or Loss From Business · retrieved September 2026
5. IRS, Instructions for Forms 1099-MISC and 1099-NEC (12/2026) · retrieved September 2026
6. IRS, How long should I keep records? · retrieved September 2026
7. Utah State Tax Commission, Sales and Use Tax · retrieved September 2026
8. Utah State Tax Commission, Withholding Tax · retrieved September 2026

Ranked and explained on the sources page.