When we hear about the word “bookkeeping”, the very first question that comes into our mind is what is bookkeeping? Bookkeeping is just a tool for the owner of the business to identify whether his business is generating profits or making losses. Bookkeeping is very essential for all businesses.
Bookkeeping Services -
Basically,
bookkeeping is the procedure of recording, storing, and retrieving all the
financial transactions of a company, individual, person, non-profit
organization, etc.
It
can include –
• Bills of goods sold to clients
• Billing of services provided
• Paying suppliers
• Recording invoices
• Processing payrolls
• Financial reporting
• Monitoring accounts receivable
• Recording depreciation, and many more
Is Accounting and
Bookkeeping the same?
The
answer simply is NO. Both Bookkeeping and Accounting are definitely not the
same.
In
simple terms, bookkeeping is all about recording financial transactions.
Whereas accounting is about interpreting, classifying, reporting, analysing,
and summarizing financial data.
If
we differentiate both of them, then we can say that accounting is simply
interpreting and analysing of data while bookkeeping is not.
In the big picture, bookkeepers handle all your recorded aspects of accounting processes, whereas accountants handle all parts of accounting and related processes.
Types of bookkeeping
systems –
Mainly,
there are two types of bookkeeping systems, one is single entry and the second
one is double-entry bookkeeping system.
Single
entry bookkeeping system – it is mainly used for those companies that have
either few or uncomplicated transactions. This type of system simply records
business expenses and sales (cash sales) that are paid when incurred. It
typically consists of cash sales journals, cash disbursement journals, and bank
statements. Basically, not used in companies where complex transactions take
place at every minute.
In
simple terms, in businesses mostly double-entry bookkeeping systems are used.
In the double-entry system of bookkeeping, single transactions are recorded as
an expense or income item. Then the other entry is created just to trace the
transactions to a corresponding entry to the other side.
Bookkeeping Software
for Small Businesses
Instead
of using traditional bookkeeping systems, nowadays, many businesses do most or
almost all of their bookkeeping work by using software. They are specially
designed software, focused on ease of use, and also helpful in reducing
bookkeeping mistakes.
Advantages of using
Bookkeeping Software
• Increase accuracy
• Process accounts faster
• Provides all necessary accounting
reports
• Ease in filing business taxes
• Take backup of your data and many
more…
In
today’s era, the use of bookkeeping software has become popular especially in
small businesses. It is an effective way
to retrieve your financial information at any time.
How proper bookkeeping
helps you?
Proper
bookkeeping means to collect all your financial records in one place and
organize them according to their category. The more organized your financial
books, it will reduce your headache of tax filing.
An
organized financial book is helpful to keep track of all their financial
activities. It is helpful in reducing your stress and last-minute scrambling.
To
keep your financial data up-to-date, hire an accountant for help. An accountant
only uses to enter the given data which you provide them. So it is better to
inform them about any error or changes as soon as they are realized.
In simple words, bookkeeping is the essence of
business. A well-organized financial book, i.e. bookkeeping, which is helpful
for business and for tax filing.
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