BOOK KEEPING

Types of Bookkeeping Systems. There are two types of bookkeeping systems used in recording business transactions: single-entry bookkeeping system and double-entry bookkeeping system.

Keeping your financial records organized makes it easier to locate and provide to appropriate parties. Bookkeeping is important because it helps with business analysis. It is a tool used by management to analyze business performance. The product of bookkeeping is financial statements.

Proper bookkeeping gives companies a reliable measure of their performance. It also provides information on general strategic decisions and a benchmark for its revenue and income goals. In short, once a business is up and running, spending extra time and money on maintaining proper records is critical.

Many small companies don’t actually hire full-time accountants to work for them because of the cost. Instead, small companies generally hire a bookkeeper or outsource the job to a professional firm. One important thing to note here is that many people who intend to start a new business sometimes overlook the importance of matters such as keeping records of every penny spent.

In the simplest of terms, bookkeeping is responsible for the recording of financial transactions whereas accounting is responsible for interpreting, classifying, analyzing, reporting, and summarizing the financial data. Bookkeeping and accounting may appear to be the same profession to an untrained eye.