How to Start Accounting for Things Not Previously Tracked

KathleenEmilyAnne

Hi there!
I have operated a very small business since 2015 and I have never kept track of things like: inventory, assets, liabilities. My transactions have been extremely minimal, though I do have inventory and I have filed taxes and kept bad records.

I want to start a fresh set of books from 2018 onwards, but I am lost as to how I account for these missing things. Clearly I had inventory on hand prior to Jan 2018, so if I suddenly start tracking it how will I reconcile? Do I just begin as if it were a clean slate?

Your help is greatly appreciated!

Mikeg

KathleenEmilyAnne,
What I would do is start with a clean slate by creating a balance sheet as of 12/31/2017. You can then do the bookkeeping for 2018 on the up and up. To create the balance sheet, you would look at what were your balances of known items as of 12/31/2017. Post them as a journal entry as of 12/31/2017 with the offset being owners equity. So in your case you would have a debit to cash, inventory and any other assets. Credits would be for credit cards and any other liabilities. The net of the assets and liabilities would be owners equity.