Bookkeeping for small business
Usually the small business firms maintain their books under single entry system. In developed countries the small business firm maintain their books on their software. But in developing nations most of them still maintain manual accounts. Book keeping is basically a process of maintaining the track of daily transaction. Small business firm usually maintain books such as sales register, purchase register, cash book, ledger etc.
for eg, if a sales transaction takes place on 1-4-2009 of xyz firm then they issue a sales invoice and then open up their sales register. As on 1-4-2009, then enter the name of the party if a credit transaction takes place and then enter the total amount of sales incurred during the day. Similarly if any purchases takes place, then they open up the purchase register and make a entry along with the name of the party and the total amount of purchases incurred.
The system of book keeping is usually simple compared to the accounting system of larger firms. The books are usually maintained in the form of single entry system or imprest system. Under single entry system only accounts payable, accounts receivable, cash are maintained. The records of assets and inventories are not kept but they are usually kept in the form of memorandum. In small business as the volume of daily activities are limited. The quantity of daily transactions are also few and hence the books are maintained under single entry system.
Even the small business firms must maintain their books properly. If they do not maintain proper records today, tomorrow they may face problem while filing of income tax return. They do not maintain records of the assets and inventories system.
They must properly decide if they should maintain their books under single entry system or double entry system. Even if you own a small business firm, you have to keep a detailed records of the daily transactions in your business. Single-entry system is appropriate for your business firm only if your business if very small and the volume of financial activities are very less. You can maintain limited records under this system such as tax payable, net income etc. under this system the record of the transaction is maintained in one line only reflecting whether the transaction is positive or negative.
Under double entry system the two cause effect of a transaction is maintained ie. Debit and credit. The effect of a transaction is always dual. Always two accounts are effected under this transaction. Under this system you are able to keep a track of assets, inventories, accounts receivable and payable also. When the volume of transaction in a day is more, then you can maintain your books under this system. If you want to maintain a detailed record of all your financial activities, then maintain your books under this system.
Today many accounting packages are launched in the market such as Tally 9.0, Quick books, Busy etc.
Under double entry system the two cause effect of a transaction is maintained ie. Debit and credit. The effect of a transaction is always dual. Always two accounts are effected under this transaction. Under this system you are able to keep a track of assets, inventories, accounts receivable and payable also. When the volume of transaction in a day is more, then you can maintain your books under this system. If you want to maintain a detailed record of all your financial activities, then maintain your books under this system.
Today many accounting packages are launched in the market such as Tally 9.0, Quick books, Busy