What is Bookkeeping:

Bookkeeping is the most crucial part of any business big or small and it refers to a systematic process of recording the financial transactions of the business in different books. The process involves of maintaining of different accounts and books to record different transactions and get a collective picture if the business in forms of figures and sums.

Book keeping for small business can be one using two ways single entry accounting system and double entry accounting system.

Single Entry Accounting System :

Small entry is extensively used by small business. The system mainly keeps records of the bare essentials which include cash, accounts receivable, accounts payable and taxes. The system doesnt focuses on recording of the assets, inventory, expenses, revenues and other elements. If to be maintained, they are recorded in the memorandum. This system is normally used by those small businesses that have low volume of trade. With the information received from the single entry accounting system on can generate the income statement or the balance sheet.

This system is very easy to follow and no professional training is required. However, the system has its own limitation. The data obtained form this system is generally very limited thus cannot be used for planning and controlling the business. As not being a systematic accounting system use of single entry accounting system may lead to inefficient administration and reduced control over the affairs of the business. On the other hand the system doesnt records all the entries such as the internal adjustment entries. Due to this there are higher chances of omitting several financial records in the balance sheet and the income statement. Like wise with no records of the assets in the

books there are higher chances of lax administration. In addition it becomes difficult to identify frauds with the single entry system.

Double Entry System :

This is more comprehensive and standardized way of maintaining financial records. In this system every financial transaction has a double entry thus is called as double entry accounting transactions. Transactions according to their relevance are recorded in different variables called as accounts. The financial records are recorded in different categories.

1. Purchases :

Purchases are recorded as creditors. Creditors refer to all those people the company needs to make payments. The records of these are maintained in the following:

• Purchase Invoice Daybook

• Bank Payment Daybook

• Supplier Ledger Cards

2. Sales :

Sales refer to records of customers or Debits. Debits refer to those individuals who certain payments to the company. These records are maintained in:

• Sales daybook

• Bank receipts books

• Customer Ledger Cards

3. General Ledger:

In the general ledger are maintained for the making the second posting. The books maintained under this category include:

• General ledger

• Bank account

• Unadjusted trial balance

• Journal entries

• Adjusted trial balance

• Profit and loss statement and Balance sheet

Though being time consuming and tedious the double entry accounting system is more accurate and detailed. The system records all the financial records and transactions of the business. This enables a data that can be effectively used for planning the company strategies. The double entry system provides with the net profits and losses of a business. Besides with a double entry system any kind of fraud can be easily detected. Double entry system is the most comprehensive and accurate way of finding obtaining the financial status and profitability of a business.

Ways of Bookkeeping

Manual Bookkeeping :

Manual bookkeeping as the name suggest is handling the book keeping system by hand. The accounts are hand written wherein paper books are used to records the financial records. Normally there are professional who help businesses to handle manual bookkeeping. However, this a conventional style of doing bookkeeping, which has been replaced by computerized bookkeeping system.

Computerized Bookkeeping:

There are several computer software and programs that help to do the bookkeeping. These are autonomous bookkeeping solutions and have eased the complexities involved in the double entry accounting system. Moreover, computerized bookkeeping assures accuracy, efficiency and consistency.

Tips for Small Business Bookkeeping

1. Proper Bank Account Statements :

Having the complete set of monthly bank account statements reduces considerable amounts of trouble when reconciling the financial records with the bank statement every month.

2. Consistency :

Consistency in the bookkeeping formats facilitates quick accounting and it also becomes easy to find a particular entry.

3. Cash Accounting :

For small business other than accrual a cash accounting system is much simpler to maintain.

4. Limited categorize:

Making categorize that generalize particular expenses can make bookkeeping much easier. For instances instead of making separate accounts for paper, pencils, pen etc. thy can be collectively and easily recorded in the office expense account.

5. Maintain daily records :

Maintaining daily records prevents work form getting accumulated, which then becomes boring. On the other hand daily accounting assures more accuracy and perfection.

6. Maintain proper records :

It is very important that the records made in the accounts are accurate and complete. The integrity of the business and the accuracy of the bookkeeping systems greatly rely on proper records of the financial transactions.

Why Small Businesses should have a Bookkeeping System

Well every entrepreneur understands that a good business thrives on profits. Profits are not just about a difference between the net sales and the net purchase. There are various expenditures that eat up the share of the profits. Bookkeeping allows a enterprise small or big to understand these factors and inventories. Bookkeeping tracks the business activities in forms of amounts. How much a business is earning or how much it is loosing can be easily understood with help of bookkeeping. Moreover, it also helps the enterprise to draft its financial strategies by informing about the receipts, payments and stocks. On the other hand to make appropriate tax payments a proper bookkeeping accounting system is a must. Moreover, the chances of survival of an enterprise greatly increase with a proper bookkeeping system and also the profitability increases.