To
improve great monetary administration and examination:
|
1. Better Cash Flow : Bookkeeping
provides information regarding your outstanding invoices – customer/vendor
name, amount, date issued and due date – which can be used to implement
better cash flow policies.
|
| 2.Tax Preparation : Bookkeeping is
important for filing your personal tax return too. As a business owner, a
large part of your income comes from your business. In order to know how much
you earned, you have to know what your business earned first. |
| We can
have financial information ready for tax time with a bookkeeping process in
place. All of your financial information is collected in one central system
instead of searching for receipts or invoices. |
|
| 3. Better Decision Making : You need to have access to all available information in order
to make the best choices possible. This information is provided by
bookkeeping. |
|
| 4. Easy Reporting to Investors :
Investors want to learn the business ' financial performance to be able to
quantify their investment's worth. That is exactly what financial statements
do. The balance sheet, income statement, and cash flow statement all present
the value of your business. |
| Bookkeeping
allows investors to have up-to-date and accessible information. Investors
will be able to make better, well informed, decisions which is the ultimate
purpose of bookkeeping. |
| Bookkeeping
is also for future investors as well as for current investors. |
|
5. Track Profit and Growth :
Bookkeeping is important because it shows
your business’ profitability. Bookkeeping also helps with tracking growth.
Over time, you will accumulate months and years of data. With this data, you can observe trends and
gain a greater understanding of your business cycles and compare results
across periods.
| Methods
of Bookkeeping |
| There are two methods of
Bookkeeping : |
| 1. Single Entry System |
| 2. Double Entry System |
|
| Single Entry System |
The
single-entry bookkeeping system is utilised for organisations that have
insignificant or uncomplicated exchanges. This system records cash sales and
business expenses that are paid when incurred. This system isn't customarily
utilised for organisations that have accounts receivable, accounts payable or
numerous capital exchanges.
|
| Double Entry system |
| The double-entry system of
accounting or bookkeeping means that for every business transaction, amounts must
be recorded in a minimum of two accounts. The double-entry system also
requires the amounts entered as debits to be equal to the amounts entered as
credits for all transactions. |
|
| Double entry also means that the accounting equation (assets = liabilities + owner's equity) will always be in balance. |
|
Difference
Between Bookkeeping and Accounting
|
Basis of Comparisons
|
Bookkeeping
|
Accounting
|
Meaning
|
Bookkeeping is an activity of recording the
financial transactions of the company in a systematic manner.
|
Accounting is a systematic documenting and
reporting of an organisation's financial affairs over a given period of time.
|
Decision Making
|
Decisions cannot be made on the basis of
bookkeeping documents.
|
Decisions can be taken on the basis of
accounting records.
|
Tools
|
Journal and Ledgers
|
Balance Sheet, Profit & Loss Account and
Cash Flow Statement
|
Methods / Sub-fields
|
Single Entry System of Bookkeeping and
Double Entry System of Bookkeeping
|
Financial Accounting, Cost Accounting,
Management Accounting, Human Resource Accounting, Social Responsibility
Accounting.
|
Determination of Financial Position
|
Bookkeeping is not a representation of an
association's money-related situation.
|
Accounting clearly shows the budgetary
situation of the entity.
|
|
|
|
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