Accountants define bookkeeping as the recording of all financial transactions whose sole intention is to give a transparent record of transactions that can be applied to different uses in the firm. Bookkeeping has actually evolved from the check register days where only checks and deposits were recorded to what large corporations use today, ledgers and journals. Growing businesses design their bookkeeping to suit their needs for instance investments, expenditures, and tax needs. Here are more details on bookkeeping you should know even as you find local bookkeepers near me online to hire for all your accounting concerns and inquiries.
This is a discipline of accounting that analyses and also interprets records of financial transactions in order to create reports. These transactions vary from earned revenue, interests, and loans to sales. Financial statements are forms entailing bookkeeping details and entries and are mostly used by big businesses. Depending on the level of technology of the business, different businesses depend on varied bookkeeping techniques. Small and starting businesses, for instance, use paper ledger and normal journals to keep a record of all their transactions while established businesses, companies, and organisations rely on digitalised accounting where they incorporate both accounting and bookkeeping software into their businesses. This software will then do all calculations, adjustments and the recovery of data from different records on its storage. This does not, however, mean you cannot employ staff to handle your records, you could give power to this software up to certain limits and find local bookkeepers near me online to help you with all the remaining accounting issues you have.
You have to choose your accounting period when using bookkeeping software for it to be used in the creation and closure of financial books. It is this accounting period that controls not just the expenditure but every budget and fund flow in the business. A few businesses prefer to use the normal calendar to set their accounting periods, for instance, Jan. 1 to Dec. 31 whereas other businesses could just be okay with using the fiscal year that favors them.
There are two types of bookkeeping techniques which are single-entry system and the double-entry bookkeeping system. The single-entry system is a system most growing businesses use because they only have to record a transaction once. Double-entry, on the other hand, requires that for every debit transaction recorded, the corresponding credit entry should be made to. This is referred to as the rule of double entry. This system is very conversant with major corporations handling major transactions daily. Transactions have to be recorded in the bookkeeping system whenever debts are incurred or alternatively the business earns any form of revenue.
A more secure bookkeeping system needs to have accounted for each scope of transactions in the organisation. Each scope of transactions is entailed with similar transactions for instance purchase of assets of any kind should be debited under the same category. The chart is often comprised of income statements accounts and the balance sheet accounts too. Accounts in the balance sheet include assets, liabilities and owner equity among others. Accounts in income statements are inclusive of expenses, profits, losses, operating and the non-operating revenue. Consulting with an accounting expert can help you know which financial accounts to open.
Posting and Documentation
All the transactions that are captured in ledgers are usually sourced from business receipts and more documents proving a financial transaction. Primarily the ledgers are just supposed to give a summary of all the financial transactions recorded in the book of accounts. Bookkeeping software contains customisable ledgers that could post transactions daily via your accounting service. Documentation, on the other hand, is also very important in keeping all receipts and financial documents for future reference. The duration of the storage of these documents is determined by the state’s tax departments and organisation policies.
Before purchasing bookkeeping software you have to exercise great caution for a number of reasons. The first aspect to ponder over is your needs, where the software needs to meet your demands as a business. You also have to think about the security of the system in preventing external access apart from those authorised personas to control it. The last factor to think about is the cost of purchase. You have to adhere to your budget as a company just to ensure you do not stray with your expenditures. Do market research on how different firms charge for their software. You can then analyse the different prices and do an average to get the acceptable market price to spend on your software.
Lastly, you should beware of the kind of accountants you outsource for other financial issues in your organisation. Working with experts gives you an easy time as they provide pre-meditated solutions to already existing and upcoming problems. Check for proof of training like academic credentials and permits from the state to operate as an accountant.