Bookkeeping is the first step of the accounting process for any business. Bookkeeping involves tracking and recording the financial transactions that occur within an organization. Those transactions are then summarized and used to create the financial statements at the end of a period. Without proper bookkeeping, you will not have accurate financial statements and you will be making decisions for your business blindly.
Bookkeeping is the term used to describe the process of compiling financial information in a systematic and organized manner. This profession has been around for centuries, and its purpose has not changed much over time. With bookkeeping, you can easily track the money coming into and going out of your business. This insight gives you the opportunity to see where money is being used and if any area of the business is performing better than another. Once the bookkeeper does their job, your accountant can properly do their job of analyzing and interpreting the data the bookkeeper produced and offer you advice to help your business succeed. Good bookkeeping also allows for much less stress and headaches come tax season since everything your accountant needs to file your taxes is already organized and ready for them to use.
Complete Guide to do Bookkeeping Services for Small Business
Bookkeeping is the process of documenting all the financial transactions of a business and using them to create financial reports that can be utilized to make financial decisions about the business. A bookkeeper basically maps out all the money coming into the business and going out of it, so there is a clear picture of the company’s finances.
The first step of the bookkeeping process is gathering the daily transactions. If a business utilizes bookkeeping software, most of the transactions are recorded automatically, so this step is already completed. The transactions are then organized and recorded into their proper journal, which can also be done automatically with bookkeeping software in some cases. At the end of the period, typically monthly, the transactions are then reconciled. This just means that the transactions are compared to the bank or credit card statements to confirm their accuracy.
Once everything is confirmed to be accurate and balanced, the financial statements can be produced. The most common financial reports that are prepared are the income statement (aka profit and loss), the balance sheet, and the cash-flow statement. With reliable financial statements, a business owner can make decisions on where to cut costs or invest more, and they are also used to attract lenders to help grow the business further.