Learn It
Bookkeepers should not guess. Every entry in the books should be based on something — a document, a statement, a confirmed answer from the client, or a clearly stated assumption. A clean-looking number is not more important than a supported number.
When you do not know what happened, "I need more information" can be the correct bookkeeping answer. Holding a transaction and asking a question is better than guessing and recording it wrong. A wrong entry can be hard to find later, and it can mislead the owner, the accountant, and the tax preparer.
Known Facts vs. Assumptions
A known fact is something you can prove. An invoice shows what was purchased. A bank statement shows the amount that cleared. A client's email confirms what a payment was for. These are facts.
An assumption is what you think happened without proof. You might assume a restaurant charge was a business meal, but without a receipt or confirmation, you do not know. Assumptions are sometimes necessary, but they should be documented clearly so someone reviewing the books later can tell the difference between a fact and a guess.
Documenting Your Work
Good documentation means leaving a trail that someone else can follow. This includes:
- • Keeping source documents — invoices, receipts, bills, statements
- • Documenting assumptions — writing a note that explains what you assumed and why
- • Documenting client answers — recording what the client told you about an unclear transaction
- • Documenting unresolved items — noting what still needs an answer
- • Being consistent — treating similar transactions the same way each time
Materiality
Materiality is a practical idea: some amounts matter more than others. A $5 rounding difference in a large account may not be worth hours of investigation. A $5,000 misclassification deserves attention. Materiality is judgment — it depends on the size of the business and the size of the item. The key is to focus your effort where it matters most.
Understanding Business Purpose
Before recording a transaction, a bookkeeper should understand the business purpose — why the money moved. A payment to a hardware store could be for office supplies, for equipment, for materials for a customer job, or for something personal. The bookkeeper needs to know the purpose before choosing the right account.
When to Escalate
Some questions are not bookkeeping questions. Tax advice, legal questions, entity structure decisions, and complex payroll tax issues may belong to a CPA, tax professional, attorney, or payroll specialist. The bookkeeper's job is to recognize when a question is outside their scope and refer the client to the right professional.
This is not a weakness — it is professionalism. A bookkeeper who says "that's a tax question for your CPA" is protecting the client and practicing within their scope.
See It
Here are several ambiguous situations a bookkeeper might encounter. Let's walk through how a professional thinks about each one.
$2,500 transfer with no description
The bank feed shows a $2,500 transfer out of checking. The description says only "TRANSFER." There is no receipt.
How a professional thinks: "This could be a transfer to savings, a loan payment, an owner draw, or a vendor payment. I cannot know from the bank feed alone. I will hold this transaction and ask the owner: 'There is a $2,500 transfer on March 14. Where did this money go?' I will not guess."
Restaurant charge with no receipt
A $87.50 charge appears at "Downtown Bistro" on the business credit card. There is no receipt.
How a professional thinks: "This could be a business meal with a client or a personal meal. Meals are heavily scrutinized. I will ask the owner: 'Was the $87.50 charge at Downtown Bistro on March 9 a business meal? If so, who attended and what was the business purpose? Please send the receipt if you have it.' I will not record it until I know."
Owner says "just put it somewhere"
An unexplained $1,200 payment appears. When asked, the owner waves it off: "just put it somewhere."
How a professional thinks: "'Just put it somewhere' is not a bookkeeping answer. I need to know what the payment was for. I will ask a specific question: 'What was the $1,200 payment to Smith Supply Co. on March 20 for? Was it equipment, supplies, or something else? If you have the invoice or receipt, please send it.' I will document the owner's response when I get it."
Equipment purchase categorized as repairs
A $4,500 payment to "ABC Equipment" was recorded as Repairs Expense. The invoice shows a new piece of equipment was purchased.
How a professional thinks: "The invoice confirms this was an equipment purchase, not a repair. I have a document that tells me what happened. I will reclassify: debit Equipment $4,500, credit Repairs Expense $4,500. I will note: 'Reclassified per invoice #1234 — equipment purchase, not a repair.' This is a known fact, not a guess."
Customer payment that does not match an invoice
A $3,200 deposit from "GTL Industries" appears in the bank. No open invoice for $3,200 exists. The last invoice to GTL was for $2,800.
How a professional thinks: "This payment does not match any open invoice. It could be a payment on the $2,800 invoice plus something else, a deposit for future work, or a payment I have not invoiced yet. I will ask: 'We received $3,200 from GTL Industries on March 18. What is this payment for? Is it for an existing invoice, a deposit, or new work?' I will not record it as revenue until I know."
Payment to a government agency with unclear purpose
A $1,500 payment to "State Dept of Revenue" appears. The owner asks whether it is deductible.
How a professional thinks: "I need to determine what tax this payment was for — sales tax, income tax, payroll tax, or something else — so I can record it in the right account. But the question about deductibility is a tax question. I will record the payment correctly in the books and tell the owner: 'Whether this is deductible is a question for your CPA or tax preparer.'"
Do It
Review each ambiguous transaction. Note what is known, what is missing, choose an action, and write a short bookkeeping note explaining your decision.
Do It — Document the Decision
For each ambiguous transaction, review the information, note what is known and what is missing, choose an action, and write a short bookkeeping note.
Some transactions have enough information to record. Others do not — and that is part of the lesson. Do not force an answer when the information is genuinely insufficient.
Bank transfer — $2,500 out
March 14 · $2,500
The checking account shows a $2,500 transfer out. The bank description says only 'TRANSFER.' There is no receipt or invoice.
Prove It
Answer each question, then read the explanation. There's no score — this is just to help the ideas stick.
Question 1
A bookkeeper finds a $2,500 bank transfer with no description and no supporting document. The owner is unavailable. What is the correct bookkeeping response?
Question 2
What is the difference between a known fact and an assumption in bookkeeping?
Question 3
A client asks the bookkeeper whether a certain transaction is deductible on their tax return. What should the bookkeeper do?
Key Takeaways
- A clean-looking number is not more important than a supported number.
- When you do not know what happened, 'I need more information' can be the correct bookkeeping answer.
- Document known facts, assumptions, client answers, and unresolved items.
- Understand the business purpose of a transaction before choosing the account.
- Materiality means focusing effort where it matters most.
- Some questions belong to a CPA, tax professional, attorney, or payroll specialist — refer them.
- Consistency matters — treat similar transactions the same way each time.