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Bookkeeping

Bookkeeping is the systematic process of recording and organizing financial transactions, essential for both personal and business financial management. It ensures accurate tracking of income and expenses, aids in tax compliance, and provides insights for better cash flow management. There are two main methods of bookkeeping: single entry and double entry, with the latter being more complex and commonly used by larger businesses.

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6 views

Bookkeeping

Bookkeeping is the systematic process of recording and organizing financial transactions, essential for both personal and business financial management. It ensures accurate tracking of income and expenses, aids in tax compliance, and provides insights for better cash flow management. There are two main methods of bookkeeping: single entry and double entry, with the latter being more complex and commonly used by larger businesses.

Uploaded by

kdywinnakamoto
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Tracking, recording and even organizing every single transaction you've made or even when a

business does is very important and essential. Doing this can keep all of the transactions on
track. Whether it is a large corporation, for your personal tracking and even a small business
must be doing this. This is what we call- bookkeeping. Bookkeeping is a very important
foundation of managing finances, from businesses whether small or large. This involves
recording and tracking every single financial transaction which includes sales, the purchases
made, the income and also the expenses. Bookkeeping allows companies and businesses to
check and keep on track with regards to their cash flow, monitoring the performance of the
finances. Bookkeeping is still an integral part of the process of accounting. Without
bookkeeping, businesses wouldn't be able to provide insights of their finances.

What is bookkeeping in layman’s term? Bookkeeping is the systematic process of recording


financial transactions (a business or cooperation) into organized accounts on a day to day
basis. It is also an essential part and process of accounting, which is different. At first look,
these may look interchangeable but they are not the same thing. Unlike accounting that covers
taxes, reportings and strategies, bookkeeping covers data entries to strategy. It is called
bookkeeping because it is based on double entry accounting in which each transaction affects
the debit and the other is credit. There is a rule which says, debit the receiver and credit the
giver. These two have to be recorded thoroughly and must be balanced. Bookkeeping is not just
some spreadsheets and papers. The process is very meticulous. Bookkeeping is recording
one’s business’ documents which includes the bills,invoices, receipts and focuses on the day to
day recordings. Bookkeeping is also responsible for processing payrolls besides recording
financial transactions. It is also the backbone of financial management. Besides these things,
bookkeeping maintains ledgers, journals and of course records. A small or even large
corporations, accurate bookkeeping makes sure that every single financial information is ready
and always available to use, thus serving as a foundation for managing finances. Technically,
bookkeeping is organizing raw datas and accountants will use the data to evaluate and report.

There are methods for bookkeeping, the single entry bookkeeping and the double entry
bookkeeping. First is the single entry bookkeeping, which is the simplest method. This involves
recording every single transaction only once which can be either as income or expense. It is
easy to maintain but it does provide limited financial details. Examples of a single entry
bookkeeping are: bank statements, cash sales journals where revenues are recorded. Double
entry bookkeeping is another method but it is more complex. Every transaction made is
recorded in two accounts which are the debit and credit. This method is more commonly used
by large businesses. Documents are needed for this method like inventory, accounts payables,
journal entries, loans and even payroll. It ensures an accurate financial snapshot and a
complete one as well. So once a business starts operating and run, maintaining every record is
a must.

How is bookkeeping important? First, it ensures that all transactions made are accurately
recorded. That’s why it is done day by day, every transaction that happens each day must be
recorded. Another one is bookkeeping helps in complying with tax compliance, which must be
done properly for businesses to avoid penalties and such. Bookkeeping also enables good cash
flow management since it does track every income and expenses. It helps in identifying and
monitoring the revenue and expenses which can prevent companies from unnecessary costs. It
can also help in allocating resources more effectively. It also helps in monitoring goals and
tracking if there is any progress within the company. Generating every financial statement from
balance sheet to cash flow statements can help an owner understand how your business is
going and its performance. Cash registers are used for calculating and registering transactions.
They record the cash flow of stores and keep transaction receipts for easy recording of sales in
a journal. In short, bookkeeping must be done first before accounting. It brings transparency to
all activities happening, it gives accountability and builds trust among employees, tax
authorities, investors and the stakeholders.

By having correct data, a business can meet its goals and of course to avoid shortages. Since
bookkeeping provides raw data which is very needed to prepare and make financial statements
thus it is essential. Financial transactions can be also grouped into categories such as goods,
services, taxes and also wages. Businesses may use bookkeeping softwares while some still
prefers to do it by hand and using a journal or a spreadsheet.

In conclusion, bookkeeping plays a very important role. It not just helps in making records
organized and accurate but it also plays a very huge role in planning, compliance for taxes. It
ensures a solid rock for financial management for more growth and to keep it going. It saves
businesses from the chaos of searching the important documents needed every time needed or
whenever it is needed. Bookkeeping makes sure that all business’s transactions are recorded
accurately, archived, organized and kept and stored securely. It can push a business to
success. It can by be applied for personal use as well, by using this an individual can practice
managing their finances wisely. By tracking their income, their day to day expenses, their
savings. It enables financial discipline and a great tool in achieving personal goals and it can
make sure preparedness for emergencies. It can reduce unnecessary spending and purchase
and supports long term planning all throughout. It is not just tracking your money but it is taking
control of your finances which can lead to better outcomes in the near future. Just like in
businesses, keeping track of everything can be a help for you to understand where your money
is going or how you handle it. It can keep your finances, bills and savings organized. It can
helps you as well in building a stable and a future where you know you are secured.

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