What is Bookkeeping?
We often use the terms bookkeeping and accounting interchangeably. However, it is actually just part of the accounting process which deals with the recording of the transactions. So let’s know about book-keeping.
It is the part of accounting in business. It has the financial recording transactions such as purchase, sales, payment and receipts by an individual person or an organization. There are different standard methods of bookkeeping such as single entry and double-entry bookkeeping systems.
It is the process of a user, who records day to day financial transactions of a business. Bookkeeping writes the daybooks which record sales, payment, receipt, purchases, and documents, cash or credit card into the correct daybook which is a petty cash book, supplier ledger, customer ledger, etc.
Objective of Bookkeeping
The objective of this financial account is to keep all records of the financial transactions in a standard way. It is to make sure that the financial effects of these transactions are reflected in the books of accounts.
The second main objective is to confirm the overall effect of all recorded transactions on the last statement of the company. Book-keeping will eventually ascertain the last accounts of the company, namely the Profit and Loss Account and the Balance Sheet.
Need of Bookkeeping
The most important reason for bookkeeping is recording it can be maintained to show the financial position of every account of income and expenditure. You can give detailed information about each expense or income that could be obtained instantaneously through this activity.
Let the company make sales in both cash and credit that each sale transaction will be recorded. When a credit sale is made the accounts of creditor’s will be recorded. The management of a company can determine which creditors owe them how much money looking at the records or accounts.
The maintenance of books of account and financial statements is a legal requirement in different cases. In this case the companies, banks or insurance companies, there are acts that require such films to keep and maintain financial records such as bookkeeping becomes mandatory.
Activities of Bookkeeping
It comprises a lot of functions and activities such as activities are-:
- Recording all financial transactions
- Posting credits and debits in the respective ledgers
- Organizing and producing all source documents such as invoices
- Bookkeeping and payroll accounting may be clubbed with bookkeeping
Importance of Bookkeeping
It is beneficial for business owners which helps in business to manage cash flows, planning for future and well knowledge about running of business. In the below, we mentioned some important points regarding this dscussing activity , just read it
- Ease in making Routine Business Decisions
- Making business Evaluations
- Proper Reporting to Investors
- Managing cash flows
- Effective Tax Compliance
Hope this article will help you to get some knowledge regarding Bookkeeping, and to help you to manage the business easily. So always maintain it up to date and run your business smoothly.