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What is Bookkeeping?

What is bookkeeping?

Bookkeeping is the method of recording and handling all of the company's financial activities, such as sales, purchases, and payments. To support a corporation in making informed financial decisions, bookkeepers keep track of all expenses and profits. The aim of bookkeeping is to help you see the larger picture of your company's finances, balance your books, and enhance cash flow management in a more strategic way.

The Basics of Bookkeeping

An account is a record of all debit and credit entries of a particular sort, such as accounts payable or payroll, in business bookkeeping.

There are five basic types of accounts:

  • Assets. Resources or things of value owned by a company as the result of its transactions (e.g., inventory, accounts receivable).
  • Liabilities. The obligations and debts owed by a company to suppliers, banks, lenders, or other providers of goods and services (e.g., loans, accounts payable).
  • Revenues or income. Money earned by the company through sales or providing a service.
  • Expenses. Cash that flows out of the company to pay for assets or services (e.g., utilities, salaries).
  • Equity., The remaining value of an owner’s interest in a company, after all liabilities have been subtracted(e.g., stock, retained earnings).

Setting up each account so you can report transactions in the appropriate category is the first step in small business accounting. This is what the general ledger is made up of. You won't have the same bookkeeping procedures as the next ecommerce shop, but there are a variety of accounting approaches that you can use depending on your needs.

How To Keep Your Books

1. Keep Financial Statements Up To Date.

Bookkeeping involves working with numbers. Most of the work involves basic math and accounting. The details depend on the type of business you own, but it can include tasks like settling accounts receivable and bank statements, recording financial transactions, invoicing, billing, and tracking payroll.

You’ll also take care of other finance-related matters including:

  • Tax bookkeeping for payroll, income, employment, and even small business tax deductions.
  • Budget planning to help the company stay on track and grow.
  • Getting financial statements (balance sheets, income statement, cash flow, and changes in equity) ready for stakeholders.

Bookkeeping necessitates diligent study and a basic understanding of the law. If your company is audited, you'll want to make sure your reports are in order and your deductions are legal.

2. Keep an eye on what everybody is up to (and spending)

Financial bookkeeping can consume a significant amount of time. You must ensure the integrity of each financial transaction, as well as balance the books every day and monitor employee payments in and out.

This indicates that excellent communication and management skills are needed to learn bookkeeping and accounting. You may need to receive receipts from workers, handle travel expenditures, or reimburse people for expenses on any given day. Keeping a procedure in place for submissions and reimbursements means that you don't lose any expenses and that the documents are up to date and reliable.

3. Use bookkeeping services to improve processes

In your small business accounting toolkit, you should have good bookkeeping or accounting applications. Small business owners must keep up with the new technologies as virtual bookkeeping and other forms of online bookkeeping services become more common.

You can streamline data entry, produce accurate financial records, consolidate data, and simplify record keeping with good bookkeeping services or tools. It's also a simple way to improve accuracy in your enterprise and cut back on time wasted on routine activities.