Bookkeeping Basics: An Overview

Depending on the size of your organization the complexity of your bookkeeping will differ. In this article, we help you get an overview of the Bookkeeping basics.

One of the most important elements of bookkeeping is keeping track of a general ledger. A general ledger is a basic record of expenditures and receipts kept by a bookkeeper.

Due to the growth of businesses, Ledgers are now made with specialized software that may be automated and customized to your company’s specific needs.

What Is Bookkeeping?

Bookkeeping is the process of recording, classifying, and organising all financial transactions that occur within your company from the time it first opened to the time it closes.

Any money that moves within your firm is a financial transaction.

For example:

• Sales of your goods or services
• Taxes
• Money transfers
• Cash deposits
• Supply purchases
• Salary and bonus payments
• Bill payments, etc

How Does Bookkeeping Benefit Your Business?

Some of the benefits of bookkeeping are as follows:

• Performance Assessment

  Management can assess prior business performance and learn from past failures based on historical data. They can comprehend the business’s increase or decrease in revenue and expenditure.

• Future Preparation

  By analyzing the business’s previous performance trend, bookkeeping can help anticipate the future. They can develop a plan for profiting on future opportunities.

• Managing Cash Flow

  Keeping track of debtors and creditors and developing a cash flow statement that can help a business manage its cash flow efficiently.

• Inventory Management

  Through bookkeeping, business owners can keep track of their inventory utilization and purchases, allowing them to make the best decisions for their company.

• Accurate, Detailed And Up To Date Operational Information

  Bookkeeping assists management in getting the most up-to-date information on the organization regularly.

• Quicker Preparation Of Financials

  Financials can be prepared quickly now that all of the data is in one location.

What Is The Difference Between Bookkeeping And Accounting?

• Accounting is the process that comes after bookkeeping.
• The main focus of bookkeeping is on day-to-day transactions.
• In bookkeeping, you gather all documents containing transaction data, arrange it into “debit” or “credit” categories.
• You record the information into the books such as an accounting journal, cash book, or general ledger.
• In accounting, you work with large amounts of data that are collected at the end of certain time periods, such as a month, quarter, or year.
• Accounting evaluates this information in order to obtain a bigger picture.
• It shows the business owners details of their finances.

What Are The Key Highlights Of Bookkeeping?

You must collect information from the documents such as receipts and invoices in order to sort out transactions.

You must pay attention to details such as:

• Date and time of the transaction
• If it was an income or expense
• Customer or vendor names
• Transaction amount
• Transaction type

It’s essential to understand the nature of the transaction. So, you must analyze your expenditure and revenue sources.
It informs you if your business is functioning effectively. You’ll be more aware of how much you spend and how much you earn.

What Is The Best Way To Get Started With Bookkeeping?

Bookkeeping is a tiring and boring task, yet it is necessary if your company wants to survive and develop. Here are few basics that you should be aware of while taking care of your company’s finance:

• You will have to select an accounting system- Cash or Accrual.

  When you use cash accounting, you only record a transaction when money changes hands and payment is made. You can see how much money you have access to at the moment.

  Whereas in accrual accounting, revenue and expenses are recorded when they are earned, even if the actual payment will happen in the future. Accrual accounting allows you to get a wider picture of your money and plan ahead.

• Decide who will be in charge of your company’s bookkeeping. Bookkeeping is a procedure that serves as the basis for all accounting and reporting that follows.
• You will have to decide your bookkeeping format if you will be using paper or digital spreadsheet for an accounting journal, cash book, and general ledger.
• Always keep your business and personal finances separate. As soon as your firm is up and running, open a bank account for your business. Otherwise, you might risk depositing personal funds into your business account or paying for personal costs with company funds.
• Read up on your tax responsibilities or consult a tax advisor. You should be aware of what you must pay for and when you must pay it.
• And finally, decide whether you’ll maintain your books in single-entry or double-entry format.

  A single entry system records only one entry, which can be a debit or credit entry.

  On the other hand, each transaction in a double-entry system is recorded twice. This indicates that for every debit entry, there is an opposite credit entry.
  Hence, the double-entry format is more accurate.

Conclusion

Many business owners consider bookkeeping to be a complicated task. However, if you understand and properly use the data collected by your bookkeeper, bookkeeping may be your strongest companion.
Whether you are a freelancer, sole proprietor, or small business owner.
You need to know how to bill your customers, track your spending, most importantly, you must know if your business is financially secure.

How can we help you?

As your company grows, the amount of paperwork you’ll have to deal with will certainly expand. You will quickly realize that data recording is a very continuous activity. You might want to hire a service provider to assist you.

Once you start your business, we will let you focus on running your business while we take care of your books of accounts.

We at Startupgowhere offer bookkeeping and accounting services. We ensure systematic maintenance of all your records and are ready to go on a timely basis.

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