Being the owner of a small business, it isn’t easy to maintain financial records. Keeping financial records helps your business to run effectively and smoothly. But is it a wise idea to do your bookkeeping?
If you are an owner of a small business and have enough time to do your bookkeeping, that is excellent. Bookkeeping is the part of accounting used for collecting, classifying, and recording the commercial and financial operations carried out by the company. It is the record of financial transactions and information related to a business that is updated daily.
A bookkeeper is responsible for:
- Collecting, registration, and classifying business transactions.
- Narrate the accounting facts in written form.
- Execute the tasks according to the traditional procedures.
What to look for when doing your bookkeeping
Some financial transactions to look for while doing your bookkeeping includes:
- billing of goods or services sold to customers
- registration of customer receipts
- recording of supplier invoices
- payment to suppliers
- Processing of employee payment and government reports and the creation of financial statements.
The most important aspect of bookkeeping is maintaining an accurate and up-to-date record of all information. Accuracy is an essential part of this entire process. It ensures that the record of individual financial transactions is correct, up-to-date, and comprehensive. For this reason, accuracy is vital to bookkeeping.
The process of bookkeeping focuses on providing preliminary information, which is necessary to create financial statements. Each transaction is registered in the books, and all changes in the financial records are continuously updated. Bookkeeping requires the knowledge of debits and credits and a fundamental understanding of financial accounting, which includes the overall balance and the income statement. The bookkeeping process involves the preparation of accounting records, which is why it is possible to obtain the data used to evaluate the situation and get the relevant financial information of an entity.
As a principle of bookkeeping, all transactions that occur within the organization must be recorded daily in the books or the accounting system. For each transaction, there must be a document describing the business transaction. This may include a sales invoice, payments to a supplier, a sales receipt, a bill from a supplier, and payments to the bank. These accompanying documents provide the audit record (any item that gives the documented history of a transaction in a company) for each transaction. They are an essential part of maintaining adequate audit records.
Modern Accounting and Bookkeeping
Modern accounting consists of a cycle of seven stages. The first three refer to bookkeeping, that is, the systematic compilation and recording of financial transactions. Bookkeeping is vital to manage your business resources properly. Also, you will need these records for tax purposes. Whether you prepare them on your own or outsource the process, you must understand the importance and basic principles of bookkeeping.
Keeping accurate records of transactions will help you identify any problems in the flow of money and any possible legal consequences. These are some basic principles that should become a standard practice of your books. If you decide to do bookkeeping on your own, you should consult an expert, especially at the beginning, to make sure you are doing the right thing. As your business grows, you may want to hire someone or implement a more sophisticated bookkeeping software.