Bookkeeping is the process of tracking, organizing, and recording all the financial transactions that occur in a business. These records are then summarized in the General Ledger and confirmed to be accurate by creating a trial balance. If everything is balanced, the financial statements like the income statement and the balance sheet are then prepared for that specific period. The main objective of bookkeeping is to provide insight into a company’s financial status, however, there are many other objectives of bookkeeping as well.
Bookkeeping records are used in things like decision making and budgeting. Knowing where the money is coming in and where it is being spent is key to figuring out where any problems may lie and where growth may be possible.
They are also used to attract lenders and investors into your business. This allows you to attain more capital to build your business further.
Another objective of bookkeeping is to assist you with your taxes. Good bookkeeping records are essential when tax season rolls around, and your accountant is figuring out what deductions you are eligible for and how much money you owe the government. Proper records will make filing your taxes a breeze, which will save you money since your accountant will be working on your taxes for fewer hours and you will not be facing any penalties or fees for lateness from the IRS. Bookkeeping is essential to running a healthy, successful business.