Hello everyone and thanks for joining us today. My name is Phyllis Wischer. I am an eBay Education Specialist, and co-founder and Business Success Coach for Certified Solution Provider SageFire, Inc. - creators of KeepMore.net. I am also a Public Accountant with over 20 years experience in helping thousands of small business owners with their bookkeeping, accounting, payroll and tax needs.

As a Certified Solution Provider, SageFire specializes in helping small business owners’ track their business financial activity using its online accounting, contact management and document storage solution. Our solution, KeepMore.net, makes it simple for you track your business while maximizing your tax benefits.

During previous workshops we have discussed many issues surrounding keeping your business records – your income and your expenses, cost of goods sold, using your financial records to make good business decisions, using your financial records to complete a tax return, and other various topics. During our session today I want to give you a better understanding of the double-entry bookkeeping method and at the end of the session give you a brief explanation of single entry bookkeeping and why this simpler method works for many eBay business owners. Today’s topics will include:

• What Does the Term Bookkeeping Mean?


• Supporting Documents


• Cash vs. Accrual Accounting (quick explanation for use in today’s workshop)


• Recording Business Transactions


• Double Entry Bookkeeping – Assets = Liabilities + Equity

The three primary reasons why you should be keeping good and accurate records of your business transactions are:

• Know your business profitability and be able to make good, valuable business decisions


• Record all your allowable business deductions to help you keep more of your hard earned money in your pocket


• File the required tax return with the IRS

Before we go any further, I want to remind you that I am not here to provide tax advice, just some basic information about double-entry bookkeeping. For your specific business and tax situation, I recommend you consult with your tax advisor.

What Does the Term Bookkeeping Mean?

We have all heard the terms bookkeeping and accounting. Many use the terms interchangeably; I know I do. Basically, however, they do have different meanings.

Bookkeeping is the detailed act of recording and summarizing business transactions and events. It starts with supporting documents that are generated when there are transactions such as purchases, sales and payroll in your business. For an eBayer, this includes your online auction sales and online purchases through eBay. These supporting documents contain information about the transactions documenting that the transactions did take place and provides information like customer name, vendor name, date and amount of the transactions. They provide support for the entries in the books and the tax return of the business.

Accounting is the theory and system of setting up, maintaining, and auditing the books of a business; the act of analyzing the financial position and operating results of a business by studying its sales, expenses and other business transactions.

There are two reasons why you should be keeping good and accurate records of your business transactions.

• Know your business profitability and be able to make good, valuable business decisions.


• File the required tax return with the IRS

As mentioned above, supporting documents provides support for the entries in the books and tax return and mostly consists of following (there could be others not listed):

• Sales Documents should show the source and amount




• eBay sales receipts


• Cash register tapes


• Bank deposit slips


• Receipt books


• Sales invoices


• Credit card charge slips




• Purchase Documents should show the source and amount of items bought for resale or for use in the manufacturing process




• eBay purchase documentation


• Canceled checks


• Cash register tap receipts


• Purchase invoices


• Credit card slips




• Expense documents should show the source and amount of costs incurred to carry on your business




• Payroll register


• Canceled checks


• Cash register receipts


• Invoices


• Credit card slips


• Vendor statements


• Petty cash slips




• Asset documents should show the source and amount of assets purchased




• Purchase invoices


• Canceled checks


• Invoices


• Vendor statements


• Real estate closing documents

Cash vs. Accrual Accounting

Just a real quick reminder on cash vs. accrual accounting; with cash accounting, income is reported when constructively received and expenses are generally deductible when actually paid. With accrual accounting income is reported when earned without regard to when it is actually received (using accounts receivable) and expenses are reported in the period in which they apply without regard for when the expense is actually paid (accounts payable). There is hybrid method for tax reporting purposes but that is not part of our workshop today.

Recording Business Transactions

Once you have generated business transactions, you need to summarize the transactions into some sort of record keeping tool. You have several choices.

Double-entry bookkeeping – there are a couple of choices to keep your records in a double-entry system – we will go into the detail of debits and credits below

• Manual double-entry bookkeeping system




• Having an accounting background helps


• Using paper “journals” to chronologically record the transaction information from the supporting documents


• Transfer the information from papers journals to a paper ledger


• Ledgers contain the totals from each journal


• Financial statements are generated from the Ledgers


• This method was used in years past and I know from experience this is a very time consuming process.




• Electronic double-entry bookkeeping system




• Having an accounting background helps


• We are going to get into the specifics of double-entry; debits must equal credits, etc.


• I feel that the double-entry bookkeeping process may over-kill for many of the eBay small business owners

• Manual Spreadsheet




• Simply categorize into columns using a ledger sheet


• Very time consuming to manually add all columns increase chance of additional and subtraction errors


• Prone to errors


• Insufficient information when balance sheet is required for tax purposes


• Take it from someone who knows, you can spend hours and hours of your valuable time maintaining manual spreadsheets. Upgrade to an electronic bookkeeping program (either double or single entry) and spend more time doing what you like to do – selling on eBay.




• Electronic Spreadsheet




• Simply categorize into columns using a ledger sheet


• Electronic version does total columns and reduces addition and subtraction errors


• Prone to errors


• Insufficient information when balance sheet is required for tax purposes


• While this method is far better than the manual spreadsheet, you still will not be getting the complete financial data you need on a day to day basis to make valuable business decisions.




• Electronic single-entry bookkeeping program that can be simple, quick to learn and easy to use program like our KeepMore.net

Well, that’s enough of the technical stuff – let’s get to the basics of double-entry bookkeeping.

Double Entry Bookkeeping – Assets = Liabilities + Equity

There are two basic financial reports in a double-entry bookkeeping system. The first is the income and expense report that tells you your net profit (and where you are spending your money) for whatever reporting period you wish to review. The second report is the Balance Sheet. There is a third more valuable report called the Cash Flow Statement and we plan to have a workshop in the near future on that subject.

As you enter your transactions (from your supporting documents) each entry will need an equal debit and credit entry. For example when you record a deposit from income you will need to “debit” cash and “credit” income. This requirement of an equal debit and credit entry is the basis of the double-entry system.

The basic formula used in double-entry bookkeeping is Assets = Liabilities + Equity.

• You set up separate accounts for recording all balance sheet and income and expense transactions (Chart of Accounts or List of Categories in our KeepMore.net program)


• Each account has a debit and credit side




• A “debit” is an entry on the left side of any account


• A “credit” is an entry on the right side of any account


• The total of all debit entries must equal the total of all credit entries


• I have a Double-Entry Accounting Equation Worksheet available. Click here to download a copy (PDF format requires Adobe Acrobat reader)




• Every transaction is entered twice – once on the debit side and once on the credit side


• Debit entries increase asset accounts and decrease liability/equity accounts


• Credit entries increase liability/equity accounts and decrease assets accounts


• Asset accounts generally will have a debit balance and liability/equity accounts generally will have a credit balance

• Asset accounts consists of the following (but not limited to):




• Cash Accounts (checking, PayPal and savings accounts)


• Accounts Receivable


• Inventory


• Fixed Assets (equipment, furniture/fixtures, land, etc)


• Contra Asset Accounts (Reserve for Bad Debt, Depreciation, etc)




• Liability accounts consists of the following (but not limited to):




• Short Term Debts owed




• Accounts Payable


• Sales Tax Payable


• Payroll Tax Liabilities Payable


• Short Term Notes Payable




• Long Term Debts owed




• Long Term Notes Payable






• Equity accounts consists of the following (but not limited to):




• Equity




• For Sole Proprietors – Net Worth


• For Partnerships – Capital


• For Corporations – Stock (both Common and Preferred)






• Income accounts consists of the following (but not limited to):




• Income from Services


• Income from Product Sales


• Income from Shipping from Buyer


• Income from Insurance from Buyer


• Sales Discounts




• Expense accounts consists of the following (but not limited to):




• Cost of Goods Sold


• Operating expenses (rent, utilities, supplies, payroll, repairs and maintenance, etc)




• Other Income accounts consists of the following (but not limited to):




• Interest Income


• Income from Finance Charges charged to Customers




• Other Expense accounts consists of the following (but not limited to):




• Penalties

Here are a couple of examples of the most common entries.

Recording income in the amount of $2,000 deposited into a checking account.
Debit Credit

Cash (checking account) $2,000
Income $2,000

Recording a supply expense in the amount of $950 paid by check.

Supplies $ 950
Cash (checking account) $ 950

As you can see double-entry accounting is a complicated process and unless you have a thorough understanding of the concept explained above, you will find it time consuming and confusing. Also, depending on your choice of a business entity, you may not have to prepare the Balance Sheet portion of Financial Statements. You do have a couple of alternatives to using the double-entry accounting process.

You can hire a professional bookkeeper or accountant to perform the bookkeeping function for you. They would probably then continue and prepare your Financial Statements (Balance Sheet and Income and Expense Statement) and tax return for you. Be sure to shop around and get someone who is experienced in both bookkeeping and tax preparation for an online auction business like your eBay business.

Or, you can use a simpler method like KeepMore.net’s single entry, quick to learn and easy to use bookkeeping program; and, with our automatic import of your eBay transactions (both bought and sold items) multiple times daily, the process is even simpler.

We have been providing an automatic download of all your eBay transactions into our KeepMore.net tool for several years. With eBay’s new 100% web based Accounting Assistant, it will easy to download all your eBay transactions and PayPal Shipping transactions into various QuickBooks packages. Check out the new Accounting Assistant at www.ebay.com/accountingassistant.

Remember, KeepMore.net is a simple, easy way to keep track of your income, expenses, cost of goods sold and auto deductions. It contains Opportunity Tracker tool, a quick and easy way to track your vendor and customer sources. Our e-Document Storage tool allows you to scan and record copies of all your business receipts and other important documentation. To register for a KeepMore.net account, click on link below.

If you are still struggling to get your eBay historical data of bought and sold items for 2006 or 2007, please check out our YES! for eBay reports at http://yes.sagefire.com/

We wish you great success with your eBay business and are here to help you KeepMore of your hard earned money by quickly and easily tracking your business activity.

Phyllis Wischer :: phyllis@sagefire.com

Support Team :: help@KeepMore.net

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