Bookkeeping is the recording of daily financial transactions, which is a part of the procedure of accounting in most organizations and business. It includes preparing internal source documents for purchases, sales, and operations, all of which are recorded by books. The method of recording daily financial transactions is called the double-entry bookkeeping system. Double-entry bookkeeping records all financial transactions twice, once as a debit, and once as a credit.
Accounting: The procedure of receiving payments, recording debits and credits, recording transfers from / to inventory, analyzing the results of these transactions, using information recorded in books for planning and resource allocation, and reporting the results of those plans and transactions to the senior management. Management uses the information recorded in the books to set goals, organize resources, make decisions, and conduct business. All of these actions are guided by the method of bookkeeping and accounting that a company’s activities follow. Bookkeeping and accounting are therefore related, but distinct concepts.
Bookkeeping is not the same as accounting. Bookkeeping involves the recording only the financial transactions of a company; accounting is the process of obtaining information for decision making purposes associated with the recorded financial transactions. In order to effectively use the financial transactions that are being recorded in the books, the accountant must be a trained professional who practices within the standards of good practice.
Bookkeeping can be used to track a company’s assets, liabilities, ownership interest, controlled assets, capital investment, and surplus. A company’s cash flows are recorded in its balance sheet, which is a statement of cash flow that gives the owner / manager a daily record of the company’s assets, liabilities, controlled assets, and surplus (net worth). A company’s statement of cash flows also called statement of cash position gives the owner / manager a historical summary of cash flows over a period of time. The difference between an income statement and a balance sheet is that the income statement has income from operations and surplus is cash generated from the operations. A company’s profit and loss account records costs and revenue items that affect cash inflows and disbursals.
While bookkeeping involves a lot of paper, it is not considered as a necessary evil. While it can be tedious, it is still considered necessary as in the world of business, everything must be kept perfectly straight. Without accounting and bookkeeping bookkeepers the company cannot operate. Thus, bookkeeping and accounting are essential to a successful company, ensuring that the company is able to meet its obligations in a timely and accurate manner.
If your company is small and you do not have a staff of bookkeepers to keep track of your finances and accounts, you may opt to outsource bookkeeping services from a reputable bookkeeping company. With bookkeeping outsourcing, you can focus on your core business tasks while the accounting firm does the heavy lifting and makes sure that your financial records are accurate and up-to-date. Bookkeeping providers typically work with small to mid-sized companies in all accounting functions including bookkeeping, finance, and treasury. You can easily find a professional bookkeeping company that is capable of handling all of your bookkeeping needs at affordable rates. Thus, with a solid accounting system and a competent bookkeeper, your company can function without having to worry about staying within your budget and managing your cash flow.