Bookkeeping is the act of recording the financial transactions of a company. Through the help of bookkeeping, business owners are able to monitor all the necessary information about their company, in order to make sound investing, financing and operating decisions.
The primary agent involved here are so called Bookkeeper–they are in charge of managing all the financial information of the company. Bookkeeping is considered to be a crucial part of a business, primarily because it helps them track and monitor their current financial standing, including the various transactions that occurs as they continue on their business endeavors.
On the other hand, the government, financial institutions and investors also benefit from accurate bookkeeping since these organizations or people depend on the financial data information provided by the companies in order to make good lending or investment decisions. In other words, the whole economy, both the internal and external, heavily relies on bookkeeping.
The Benefits of Bookkeeping
Bookkeeping provides companies with the ability to manage their customer and supplier accounts. As a result, they were able to monitor these accounts on paper and make a business strategy out of it, then later on, track its progress. Moreover, it also allows companies to manage their cash flow more efficiently.
Another notable benefit of bookkeeping is that it allows companies to make smart business plans and decisions. Through bookkeeping, companies are able to determine which business money-generating opportunities to take, which liabilities to avoid, and to look for ways to decrease overall spending.
Furthermore, bookkeeping helps companies to comply with various business taxes imposed by the government. Proper bookkeeping gives a company the ability to meet all payroll tax, income tax, sales tax and workers’ compensation requirements.
The Process of Bookkeeping
Step 1: Analyzing the company’s financial transaction
Step 2: Assigning these transactions to specific accounts
Step 3: Creating journal entries (with the appropriate debit and credit)
Step 4: Posting these journal entries to the ledger accounts
Step 5: Adjusting the posted entries by the end of each period
The principle of bookkeeping revolves around two (2) main categories: the debit and the credit should be equal, and all the accounts should be balanced. An accurate bookkeeping is essential for every types of business. It enables small business owners or even large company owners access to timely, accurate and detailed information about the current standing of their business. Hire the Bookkeeping Townsville services now.