Book keeping is a kind of financial transaction. It involves the recording and evaluation of financial transactions of a business. This process of recording includes the recording of payments made by the customers to the business, and the recording of costs incurred by the business in production and other related activities. A bookkeeper’s role is as an auditor’s intermediary. This is because the accountant will make a note of the financial transactions that have been recorded on the journal.
Bookkeeping Helps You Budget
As we know from the field of accountancy, bookkeeping and accounting are interrelated subjects. The analysis of financial statements, which are records of financial transactions, is one of the aspects of bookkeeping. Other important aspects include the preparation of balance sheet reports, preparation of profit and loss statement and preparation of statement of cash flow. All these reports are necessary for the auditing process.
The basic job of an accountant is to record the financial transactions and then to present them to his client for review and approval. In essence, an accountant is concerned with the presentation of the income statement, balance sheet, and profit and loss statement of a business. He also provides support to the management and help them in maintaining accurate accounts and records.
The significance of bookkeeping has increased with the development of computerized systems for the recording of business accounts. In addition, some of the basic elements required for bookkeeping are special software like QuickBooks. This is a perfect tool for recording all the financial transactions of the business. All the activities of a business need to be recorded on the books. Some of the activities like invoicing, billing, payment and collection need to be properly recorded on the books. Computerized systems for bookkeeping enable easy tracking and accurate computations.
There are many accounting standards adopted by the different countries to regulate their financial activities. The accounting standards provide guidelines for the recording of financial transactions and record keeping. The importance of accounting standards cannot be under estimated. Without the adoption of these standards, the transactions recorded could be erroneous leading to different kinds of frauds and scams. Thus, accurate and complete records are essential for the successful operation of the business.
If you want to know how important of bookkeeping is, you will have to understand how essential it is for your business. You will have to keep track of all your expenses, income, assets, liabilities, and other financial or non financial items. When you adopt an efficient accounting system, you will also be able to control the flow of information thereby preventing any kind of leakages of information leading to mismanagement of resources and damaging the interests of the business. Proper and efficient bookkeeping helps the accountant to find out the real position of the company and to manage the resources effectively.