Bookkeeping - Understanding The Financial Situation Of The Company
A person, who has just entered business, should be aware of accounting and bookkeeping
. Many are under the impression that bookkeeping and accounting have the same meaning, which is not the truth. Both have some connection but are totally different from each other. Bookkeeping is done, so that we are aware of our day to day expenses and also helps us track the financial activities of our business. It keeps a record of what you have bought and what you have sold. This provides you an idea of your gains and losses in your business.
The concept of accounting involves capturing the information which is stored in the process of bookkeeping and creating a financial picture of the same. The financial picture will project things about what you have achieved and done over the financial year. Accounting is nothing putting all financial figures in a logical manner. Bookkeeping helps in figuring out the tax advantages, legal requirements of the business, tax liabilities involved etc.
A bookkeeper needs to be educated with regards to the current laws and regulations. The accountant will be able to provide all the guidance and help to the bookkeeper. The efforts of the bookkeeper and the accountant will project the correct financial picture of a company. The main things involved in taking care of a company's finance is bookkeeping and accounting. They are like two sides of the same coin and hence efforts should be taken to ensure that things are uptodate and in order.
Bookkeeping is the procedure involved in keeping the records and accounting is interpreting and analysing these records. If these two things are used judiciously, one can reap the benefits of taxes. In many organisations, the process of accounting is taken care of by the accountant and they create financial reports of the company also. Generally, preparing these records is the job of a bookkeeper.
Some of the accepted bookkeeping methods are single entry method, double entry etc. Small businesses that ignore or neglect bookkeeping, thinking that it is not worth the time spent are making a big mistake. This is not something which can be taken for granted. One needs to appreciate the fact that it can really influence and make a difference in your business at a future date.
The job of bookkeepers involves tracking of financial things which includes payments and receipts which come in daily. These entries have to be recorded in an orderly fashion. The bookkeeper ensures that all cash transactions, purchases, sales are entered properly in a ledger and journal.
The information passes on the accountant which is then analysed and processed. The accountant then makes a financial statement which gives the financial standing of the company.
Though bookkeeping may not be directly related to the company's profits, but it does have an impact on the overall financial health of the organisation.
by: Gen Wright
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