Book-keeping & Accounts Preparation
What is Bookkeeping?
Keeping
records of all financial transactions
Bookkeeping is the recording of financial transactions, and
is part of the process of accounting in business and other organizations. It
involves preparing source documents for all transactions, operations, and other
events of a business. Transactions include purchases, sales, receipts and
payments by an individual person or an organization/corporation. There are
several standard methods of bookkeeping, including the single-entry and
double-entry bookkeeping systems. While these may be viewed as "real"
bookkeeping, any process for recording financial transactions is a bookkeeping
process.
The person in an organisation who is employed to perform
bookkeeping functions is usually called the bookkeeper (or book-keeper). They
usually write the daybooks (which contain records of sales, purchases,
receipts, and payments), and document each financial transaction, whether cash
or credit, into the correct daybook that is, petty cash book, suppliers ledger,
customer ledger, etc. and the general ledger. Thereafter, an accountant can
create financial reports from the information recorded by the bookkeeper. The
bookkeeper brings the books to the trial balance, from which an
accountant may prepare financial reports for the organisation, such as the
income statement and balance sheet.
Bookkeeping is important for helping you maintain accurate
financial records. It also provides information to make general strategic
decisions and a benchmark for its revenue and income goals. In short, once a
business is up and running, spending extra time and money on maintaining proper
records is critical.
For better analysis and management of business finances
Bookkeeping
is not just about maintaining financial records, it’s about analysing them too.
Every business needs to maintain a healthy cash flow in order to continue to
pay staff and suppliers. Failing to do so could prevent the business from
functioning as normal, which could lead to lost business and, in extreme cases,
liquidation of the company. As bookkeeper it is your job to continuously
analyse the business finances to ensure that cash flow is healthy and the
business can remain strong.
To help plan business strategies
A bookkeeper’s analysis of business
finances will help to guide the overall business strategy, giving sage advice
to business owners. Plans to expand, invest and budget will all be influenced
by the existing financial records, and as a bookkeeper you may be asked for
recommendations on a regular basis. Business planning simply cannot be done
successfully without looking over financial records, so bookkeeping is an
important part of business expansion.
To fulfill tax obligations
Bookkeeping ensures that all
important financial documents, incomings and outgoings are thoroughly recorded
in order to pay corporate tax. Without appropriate bookkeeping throughout the
financial year, it can be incredibly difficult to file an accurate tax return.
Incorrect returns could mean the business overpays, which could put pressure on
their cash flow, or underpays, which could result in extra demands for payments
with interest.
To fulfil legal obligations
It’s not enough for businesses to simply
submit tax returns and GST returns, they must also maintain business records in
order that HMRC can audit their finances at any point they wish. This is to
ensure that the business is paying adequate tax, wages and National Insurance
contributions. It is the bookkeeper’s job to ensure all these records are kept
up to date, with every important transaction appropriately recorded to prevent
any inconsistency with previously submitted tax returns.
For more information on this visit TAXAJ.
Related Articles
Books of Accounts and Audit Requirements
The Income Tax Act has specified the books of accounts that are required to be maintained for the purpose of Income Tax. These have been prescribed under section 44AA and Rule 6F. Who is required to maintain books of account? Books of ...Deferred Tax Asset Meaning & Examples in Income Tax Law
What is deferred tax Deferred tax is the tax for those items which are accounted in Profit & Loss A/c but not accounted in taxable income which may be accounted in future taxable income & vice versa. The deferred tax may be a liability or assets as ...What are Adjusting Entries in Accounts?
What are adjusting entries? Adjusting entries are usually made on the last day of an accounting period (year, quarter, month) so that a company's financial statements comply with the accrual method of accounting. In other words, the adjusting entries ...Difference between a Book-Keeper & an Accountant
What is Bookkeeping? Bookkeeping includes the recording, storing and retrieving of financial transactions for a business, nonprofit organization, individual, etc. Example: Typical financial transactions and tasks that are involved in bookkeeping ...Will technology replace accountants in the near future?
In recent years technology has evolved at a much rapid pace, so fast that it has almost gained a life of its own. Technology has been making continuous advancements in each & every field including our very own Profession of Accounting. During its ...