Bookkeeping is the process of recording financial transactions and is part of accounting process in the business. Transactions consist of sales, payment, and receipt by and organization or an individual. There are many methods of bookkeeping including double-entry bookkeeping system and single-entry bookkeeping system.
Bookkeeper generally maintains the bookkeeping accounts. A bookkeeper is an individual who records the daily financial transaction of an organization. Bookkeeper is someone who makes sure that all the financial transactions both cash and credit are recorded in the right books of accounts so that the accountant is able to create a final report based on the transactions recorded by the bookkeeper. A bookkeeper records the transactions till the trial balance stage then the accountant prepares the income statement and the balance sheet.
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Bookkeeping and Accounting
On a beginner’s level, Bookkeeping and Accounting are considered as the same. While booking is recording, summarizing, and preparing the final statement of the financial transaction, Accounting is about analyzing and interpreting those financial data and according to that information make financial decisions for the business. Bookkeeping is clerical in nature. However, accounting is a wider concept as it analyzes and interprets the data and helps the manager make further financial decisions
Bookkeeping can help your business
Bookkeeping is significantly important to a business for keeping the comprehensive records of the transactions. It is vital because it helps in determining the operation result, controlling assets and other resources of the business, financial positions, forming financial discipline assessing liabilities, tax, etc. If you don’t have an exact handle on the income and expenses of the firm, you would not be able to realize whether your business is making a profit or not. Monitoring the flow of the cash helps you make better decisions for your business. Here are some of the major benefits of bookkeeping:
Efficient financial analysis
Proper management is one of the most important things businessmen should focus on. When your invoices are delayed, there are no follow-ups on the payments, etc. It will create many problems for your business. Bookkeeping can organize all your financial transaction, thus help you maintain an efficient cash flow management in the company.
Reporting to investor becomes easy
With bookkeeping, the process of reporting to the investor about your financial status becomes very easy, as all the charts, graphs and the list of data presented to the investors can be easily acquired from the bookkeeping accounts.
Helps in fulfilling tax obligation
Bookkeeping maintains all the information and documents to fulfill the annual taxes. With bookkeeping, you don’t have to worry about going through all the bills and expenses during tax time. With an organized Balance sheet, bookkeeping has made tax return easier as well.
Better business planning
Your Balance Sheet and Income statements are all you need to see whether your business is going on the right track. Bookkeeping helps in maintaining these statements and thus gives you an overview of your business.
Proper Record of the books as required by the law
Bookkeeping maintains a financial record which keeps all the invoices (small/big) organized. Thus the retrieving process becomes easier during the auditing.