Bookkeeping
What is Bookkeeping?
Bookkeeping– Is the recording of financial transactions, and is part of the process of accounting. This is all about recording proper accounting transactions to make an indelible copy and page number in a company’s check book. Good bookkeeping is important for keeping accurate financial records, compliance with the law and ability to make informed business decisions.
Bookkeeping Tasks
1. Recording Transactions: The book keeping system is used to record every transaction – sales, purchases, receipts & payments.
2. Ledger Maintenance: The recording of transactions would be sorted out into individual accounts in the general ledger, which provides a historic record containing all financial activities.
3. Check Reconciliation: Bookkeepers match up bank account statements using the company’s financial documents to ensure accuracy.
4. Reports: Bookkeepers prepare books (or financial statements) and reports like trial balance, balance sheet or profit/loss over monthly,quarterly etc bases.
5. Book keepers follow up on accounts payable and receivable, making sure that all bills are paid timely
6. Compliance: Bookkeepers assure that financial records are in compliance with the laws, regulations, and standards that govern tax, as well as financial disclosures.
Importance of Bookkeeping
The art of precise bookkeeping is necessary due to several grounds:
· Financial Management: Gives a clear view of the company’s financial situation, helping management make correct decisions.
· Compliance: To be sure of adherence to all the tax laws along with the financial rules would eventually lower the possibility of getting into the legal trouble and paying penalties.
· Budgeting and Forecasting: Always come back to the point that accurate accounts are essential for realistic budgeting and financial forecasting.
· Investor Confidence: The business is transparent and truthful in relation to financial reporting and secures the investor confidence of kinds which is the most important part of the fundraising.
· Operational Efficiency: It brings in efficiency in the process of financial transactions and, as a result, errors are reduced, thus money and time are saved.
Bookkeeping methods
1. Single-Entry Bookkeeping: You are only required to record the transactions once in a journal or ledger. The most basic and most appropriate for small businesses that have a very simple accounting system.
2. Double-Entry Bookkeeping: Each transaction is recorded as a debit in one account and as a credit in another one. This method gives a much more thorough and accurate picture of financial activities and is the standard method for most of the companies.