What Is Bookkeeping
Bookkeeping is a way by which we record each and every financial transaction, and it is also a part of accouting in the businesses. A transaction like – Purchase, sales, payment, and receipts of every individual person in the organization. Nowadays there are several methods of bookkeeping that are available in the market the most effective way to handle your bookkeeping with the help of QuickBooks.
QuickBooks is an accounting and bookkeeping software and this software is specially designed for the small and medium-sized businesses. As you know every software is facing error and bugs. If you are using QuickBooks accouting software then you can face the error. To solve any kind of error contact with our expert team they will help you to come out of the problem. Auditxpert provides one of the best quality services.
Importance of Bookkeeping
Bookkeeping is a way by which any company measures its performance. It helps you to provides valuable information on common strategic decisions and a benchmark for its revenue and income targets. If you are running a business then it is very important to maintain the proper records of your transactions.
Many small companies actually hire full-time accountants to work for them due to cost. Instead, smaller companies usually employ a bookkeeper or outsource the job to a professional firm. An important point here is that many people who intend to start a new business sometimes ignore the importance of matters such as keeping a record of how much money each spends.
Why Your Business Needs Bookkeeping
There are several reasons why your business needs bookkeeping some of them are the following:-
- Accurate Bookkeeping helps at the time of tax season.
- Stay on top of debts
- Help to understand the way of profit and losses.
If you manage all your accouting books in a good way then it will help you to find out the overall income. Bookkeeping will help you to find our those places where you need to spend more to earn lots of profit. With this kind of information, you can take action against those products and services which are not getting the profit. Bookkeeping is one of the best ways to make the decision to get a higher profit in your business.
If you have a detailed financial record then the investor can easily invest his money into your business. It also helps the investor where his money put in your business. Bookkeeping also tells you the financial state of any business and tells the potential for future success.
If your business isn’t earning what you expected. Then you can easily catch your fault with the help of bookkeeping where you have done the mistake. Your business is running smoothly then you can show the bookkeeping information to the investor then will get ready to invest in your business.
You have done your bookkeeping in the best manner then you can understand the market value of your business. If you decided a big goal for your business then it becomes easy to understand the health of your business. Suppose you are running a small restaurant and 3month before you have launched the new menu items and your profit is increasing. If you have the record of your every transaction then you can quickly find out which list of items is more purchasing by the customers. After that, you can add some related items in the menu later. Bookkeeping plays an important role at the time of taking the decision.
Finally, if you have a proper record of all the transactions then you required to file taxes. Know how much has been spent on certain supplies and expenses in the year.
Hiring an experienced accountant to perform your bookkeeping task, especially in the first few years of your business. At that time you can focus on the other areas of the business. Taking the advice of a professional is a great choice to understand the bookkeeping properly. Mostly small business owners want to do their bookkeeping by ourselves, so if you are confident in your record-keeping skills than this will save you lot’s of money.
What is the Role of a Bookkeeper
Bookkeeping is that part of accounting that relates to the collection and organization of financial documents. Bookkeeping means to collect all the data which is related to your company in an organized way. What type of documents does bookkeeping cover? An accountant handle all the given below activities:
- Payroll record
- Bill description
- Bank and credit card statement
- Tax Form and Return
Accounting encompasses these data aggregation duties, analyzing sector numbers and estimates of profit and loss as well. However, bookkeeping as a term does not include long-term computations and analysis. Having said that, good bookkeeping ensures that you have numbers and data to help you make predictions about the future of your business and help diagnose the financial health of your business.
Here are 10 basic types of bookkeeping for small business:
Cash: It understands that it is more basic than this. All your business transactions go through a cash account, which is so important that often bookkeepers use two journals, cash receipts, and cash disbursements, to track activity.
Accounts receivable: If your company sells products or services and considers collecting payments immediately, you have “receipts”, or money received from customers. You should track accounts receivable and keep it up to date so that your bill and invoice on time and properly.
Inventory: Unsold items are considering as sitting money sitting on the shelf and you must have track it carefully. The number of your books should be kept from time to time keeping in mind the physical count of the list.
Accounts Payable: No one likes to send money from a business, but a clear view of everything through your accounts makes it a little less painful. Brief bookkeeping helps assure timely payments and avoid anyone having to pay twice! Paying bills early can also make your business eligible for a discount.
Loans payable: If you have borrowed money to buy equipment, vehicles, furniture or other items for your business, this account tracks payments and due dates.
Sale: The sale accounts track all your incoming revenue of your sell. The recording the sales transaction entries tell you where your business stands now.
Purchase: If you are recording the purchase account of every raw material or finished well for your business. It works as a key component of calculating the “cost of goods sold” (COGS) is going to be what you deduct from the sale to find your awarded gross profit.
payroll expenses: In the small and medium-sized businesses, the payroll expense is the biggest cost. It is compulsory to keep records of this account accurately and up-to-date to meet tax and other government reporting requirements. If you don’t record this transaction then it can create a serious problem.
Owner’s equity: This is the most important part of the business because it tracks the amount which is put by the owner of the business. Also referred to as net assets, the owners represent the amount of money once the asset is deducted from liabilities.
retained earnings: The Retired Income Account tracks the profits of any company that is reinvested in the business and is not paid to the owners. Retired earnings are cumulative, meaning that they appear as the total money that has been running since the company’s start. It takes a lot of time to manage this account and is important for investors and lenders who want to track how the company has performed over time.
Mainly we categories the bookkeeping in two parts the first one is “Manual bookkeeping” and “Automatic Bookkeeping”. The manual bookkeeping is a traditional way by which a bookkeeper prepare all the record on the paper using a pen or use an offline program such as Microsoft Excel or Word to record income, expenses, interest, and any other cash flow item that can be used in financial reports Is visible. If you prefer a hands-on approach, the manual method may work, but it can also be time-consuming, leaving more room for human error.
Automatic and Online Bookkeeping
Automatic bookkeeping as their name suggests we take the help of accouting software for doing the bookkeeping tasks. It automatically does all the calculations and data entry within a second and without making any mistake. Let’s take an example of QuickBooks online accouting software that help to track the income and expenses. This online software easily connects with your financial programs that your business is currently using, such as mobile payments and online banking, etc.
All your software is linked through the cloud, so that what you pay and receive can be automatically recorded in the digital ledger. The software program automatically calculates all the difficult calculations for you, giving you an accurate picture of your total income and which is updated each time your money runs out.
Single-Entry Vs Double Entry Bookkeeping
- You must have heard at some point in your life, single entry and double. But you may little bit confuse in understanding the single and double entry books. Let me clear this confusion.
- Single-entry bookkeeping as their name suggests each transaction is entered as an entry in book, whereas in double-entry bookkeeping, a transaction is entered twice. Let’s make you better understand with the help of an example- If you make a sale of 30 dollars, then in a double-entry system, that will be recorded as a profit in the income book and a decrease in the total value of the inventory.
- Single entry bookkeeping is very simple to under because you only need to each transaction only one time. This process of written single-entry bookkeeping is good for very small size businesses. Let’s take another example to understand you- imagine you work full time, but you have a side business of selling the clothes then single-entry bookkeeping is sufficient to record your profit and expenses.
- However, if you are running a business full time then the single-entry bookkeeping would not be a good idea for you. The dual entry method leaves less room for error and making it a better option for balancing the complex books. In reality, bookkeeping is not that complex. You can take the help of QuickBooks software to handle your daily bookkeeping tasks.
Which financial records you must have to keep?
Keeping a record of all your business activities is good for business owners. And we have already discussed above what is the importance of Bookkeeping. There are also some other sources of data that you should record in your bookkeeping some of them are written below.
- Payroll record
- Bank and credit card statement
- Investment statement
- Tax Returns
For recording the above points you must have to organize a record and save your records on the cloud. So in the future whenever you need to access your information then you can access it through any digital device. You must have to store your data in a well-organized way. If you have subjected to an audit, then you can save a big headache.
As a business owner, you need to keep your all financial and tax records for the next six years. If you want to more secure your all the business details then you need to move on to QuickBooks software. This software will give you more security and records older than six years can be safely disposed of by hiring a professional document shredding company. For digital records, QuickBooks allows you to easily delete or replace historical transaction data to save storage space and secure sensitive financial information.