What Is bookkeeping And How To Maintain Systematic Bookkeeping?
Often people engaged in setting a small-scale business have come across words like bookkeeping and accounting which is considerably used interchangeably. Bookkeeping is basically maintaining a track of money that goes out and comes in where a bookkeeper is simply involved in maintaining records of the made transactions in a general ledger. It is considered an efficient way of recording the financial transactions taking place in terms of the business and customers.
10 basic examples of Bookkeeping are as follows:
- Accounts payable
- Accounts receivable
- Loans payable
- Owners’ Equity
- Payroll Expenses
- Retained Earnings
Bookkeeping is a process of tracking, storing, and retrieving financial records and transactions. Now the question that arises is why one should maintain bookkeeping and what are the advantages of bookkeeping.
- Tax Issues: when you are engaged in carrying out a business, be it of different forms and sizes, there is an involvement with the federal and state income taxes, employment taxes, sales taxes, etc. And with having of an organised bookkeeping processes you can maintain easy records of all money going and coming in the business in various forms which eventually also involves managing the deadlines and acts as an reminder for the business owner to function its business smoothly.
- Lingering Errors: When you are involved in business doing, committing mistakes and happening of problems is a common thing. When such situations arises, fixing them becomes easier when you are involved having a maintenance of bookkeeping. There are very common uncertain situations that happen to occur when you are engaged in owning a small business like there can be a situation of under-billed a client or they might have underpaid. Your bank might have double charged you or not credited a deposit properly and many more. Such instances and problematic issues can easily be resolved if the business has proper bookkeeping. Such problems cannot escape your attention and that can only happen with bookkeeping.
Evidence for Financing: The basic function of bookkeeping is to maintain proper and correct track of the financial transactions which acts as an evidence when you are in need to take loan. Yes, with bookkeeping you actually can demonstrate your company’s stability forth in the line credit line. It helps you to provide the lender with your income tax returns, financial statements, and records to prove your monthly revenue, expenses, and net income. Without these critical statements, approval of the loans isn’t likely to happen.
6 Basic and Easy Steps of Bookkeeping
When you are involved in owning a small scale business, it is compelling advisable to have bookkeeping with a bookkeeper who is trustworthy and understand the meaning of smooth business running. The following easy and very basic steps can help you to maintain bookkeeping in the most effective manner.
- Choose How to Keep the Book– some businesses operate out of their check book while others might track their purchase and expenses in Excel sheets as well as issue invoices via MS Word, but, these can be ideally inefficient. The best way that is advisable to keep book is taking up accounting packages are extremely affordable for businesses of all size. infact it is also advisable for the owners to try, mix and marry different forms of bookkeeping and do the best applicable for the business you own.
- Decide on Cash or Accrual Basis–it is very important to decide upon what would be the base of bookkeeping. Bookkeeping is recording the financial transaction both ways but it is very important to understand and decide as to what would be the base of recording it- whether it is going to be related to cash or whether it is to be done on the accrual basis. This implies to decide upon whether the bookkeeping will record every transaction done in terms of cash-in-hand or cash-out expenses or accrual basis which involves recording invoices and track account receivables.
- Set up an Accounting System- there are various software applications that make the procedure easy and convenient of maintaining the records in form of bookkeeping. When it comes to this, it is vitally said to decide upon the setting up of accounting systems which implies that the business owners should be able to set up a systematic system which would imply having programmes like Outlook Online and Xero which is highly recommended when it comes to bookkeeping. The software enables you to choose the required and preferable templates to maintain an organised report or record of the financial transactions in form of bookkeeping.
- Setting up Logging Activities- Bookkeeping is a daily chore and wearisome also. when involved in business owning, you are supposedly expected to incorporate such habits like recording when made a sale, and issuing an invoice when needed, record details when spend money, etc. Recording every check you write and every bill you owe to customers (accounts payable) is also a part of bookkeeping. Often it is compellingly to maintain the smallest of businesses should have weekly bookkeeping activity to function at ease.
- Maintain Detailed Records-It is important to record your business transactions to produce organized accounting records. Bookkeeping is a detailed record maintenance of the income statements showing changes over a period. This eventually ensures fixing problems and also resolves them at ease. Bookkeeping also allows you to provide records when audited and acts as a proof of the transactions made. When you choose a digital recording of the informations, make sure to have a cloud backup too. Maintaining records is a great way to stay organized on a regular basis.
- Timely Filing Taxes-when you run a business, even of a small size, you have employees and hence is bound to have involvement with payroll taxes, income taxes, etc. Bookkeeping permits you to maintain such records easily and effectively.
However, you now know why is it important to have bookkeeping and what can make your small business flourish smoothly. Perhaps also keep in mind there are small professional assistance who evidently deals with ‘bookkeeping’ which involves small business bookkeeping Surrey, small business bookkeeping Vancouver, small business bookkeeping Richmond, small business bookkeeping Coquitlam, small business bookkeeping Burnaby, etc.