Monday, September 21, 2020

Importance of Bookkeeping in Businesses

 



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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