Bookkeeping

Bookkeeping or Account Bookkeeping is the process that involves the systematic organizing and recording of any financial transactions taking place in a company, so that it could be totally reliable while tracking an information at any time later. The term 'accuracy' plays a notable role in Bookkeeping. Proper account bookkeeping could assist you with the tracking key operations, financial decisions, and good investments. A Bookkeeper is someone who is employed by the company, whose job is to essentially record any payments (say, loan payments, payments to suppliers, etc.), monitor asset depreciation, and generation of the financial reports.

Types of Bookkeeping

There are two different types of bookkeeping.

1.Single-entry
2.Double-entry

Single entry bookkeeping is the precisely done for all small businesses that don't entail the arduous transactions. Payment details are recorded accurately, and notes on the bookkeeping and the accountancy are made from time to time. Individuals entries ought to settle down with the bank account details. For penny accounts or where the transactions don't happen on a regular basis and the single entry system of recording accounts is considered to be the best.

The double entry bookkeeping is the process way too tedious as it jots down the accounts details of complex and high-budget companies. In this process of bookkeeping there are the endless debits and credits take place so spontaneous recording accountinf might be indispensable. Therefore, for large companies where the numerous entries are made per one day and the double-entry system is the perfect fit.

What Does Single-Entry and Double-Entry System Means?

1. Single-Entry System: As the name itself suggest a Single-Entry system means a single entry for all the business transactions should be include in the accounting records. Generally speaking of a single entry accounting system works better for all small businesses with low revenue. In addition to this under single-entry bookkeeping system one will not find the records of assets and liabilities. But will find the records of the cash disbursements and the cash receipts.

2. Double-Entry System: Double-Entry Bookkeeping System will maintain the quality method of record-keeping normally used by the businesses, bookkeepers and accountants. The plan for executing the double-entry bookkeeping system is for more lengthy and complex than single-entry bookkeeping system. It provides the concept of a debit and credit which means that for every transaction there is a something received and given up.

Objectives of BookKeeping

1. To record the transactions :
The first objective of a bookkeeping is to maintain the accuracy and to complete records of all financial transactions in a systematic orderly manner. It systematically records all the transactions and it will ensures that all financial transactions are recorded and reflected in the books of accounts. These recorded transactions can be used for the future references.

2.To show the correct position :
Bookkeeping helps to ascertain the overall impact for all financial transactions of a company. It reflects to the financial effect of all the businesses transactions that have taken place in a financial year. It provides the financial information to the shareholders and the management of a company, thus helping them to formulate the future policies and the plans.

3.To detect errors and frauds :
Bookkeeping helps to identify transactions and summarizing them in to chronologically in a systematic manner. It ensures that books of the accounts are correct and up-to-date and chronological and complete. Thus, it helps to detect any of the errors or frauds in a businesses.

Importance of Bookkeeping

Bookkeeping is a necessary for all the businesses, irrespective of the sizes, nature, business transactions, or any specific industries. Upon the commencement of the businesses maintaining the proper records is essential. The following points are the importance of bookkeeping:

1. Records the source of transactions :
Bookkeeping acts as a source of all financial transactions of the business, since it records all financial transactions from the source of the transactions like receipts, invoices and payment notes etc. Bookkeeping will keeps tracking of the payments, receipts, purchases and sales to records the every transaction made by and from the businesses. The financial statements or other accounting reports of the businesses are summarized from their books of the accounts.

2.Helps in decision making :
Correct and the proper bookkeeping process provides the companies with an accurate measurement of their performance. It also provides the information for making general strategic decisions and the benchmark for its income and the revenue goals. Bookkeeping is the reliable source for the companies to measure their financial performance of the business. One of the main reason for the bookkeeping is maintaining all financial records of the businesses and that shows the financial position of every head or account of income and the expenditure. All companies can obtain detailed information about each record income or expense instantaneously through the bookkeeping.

3.Gives information to prepare financial statements :
Bookkeeping summarises expenditures, incomes and the other ledger records periodically. Since, the bookkeeping records and tracks all financial transactions and it becomes the starting point of the accounting. If bookkeeping of a company is not proper then the accountings of the company will be not accurate. Bookkeeping provides the information to prepare the financial reports and which states the specific information about the businesses on how much profits it has made and the worth of the businesses at a specific point of time.

4.Legal requirement :
Maintenance of the financial statements and the books of accounts is legal requirement under many acts. In the case of the banks or companies or insurance companies they acts that regulate them to require such firms to maintain and keep the financial records. Thus, the bookkeeping becomes necessary for all such companies.

Sincerely,
The Novai Tek India Pvt Ltd Team