What is bookkeeping / Reporting ?
Bookkeeping is the process of recording all the financial transactions of a business in an organized and systematic way. Think of it as keeping a detailed diary of every penny that comes into and goes out of your business. Here’s a simple way to understand bookkeeping:
Key Concepts of Bookkeeping
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Transactions
Any activity that involves money coming in or going out of your business is a transaction. This includes sales, purchases, payments, and receipts.
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Accounts
These are categories where transactions are recorded. For example: Revenue Accounts: Money your business earns (sales, service income). Expense Accounts: Money your business spends (rent, utilities, supplies). Asset Accounts: Things your business owns (cash, equipment, inventory). Liability Accounts: Money your business owes (loans, accounts payable).
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Double-Entry System:
his is the most common method of bookkeeping, where every transaction affects at least two accounts. It ensures the accounting equation (Assets = Liabilities + Equity) stays balanced. For example, if you buy office supplies with cash, your "Supplies" account increases, and your "Cash" account decreases by the same amount.
Why Bookkeeping is Important ?
Bookkeeping is crucial for maintaining financial clarity, as it provides a clear picture of your business's financial health, enabling informed decision-making. It ensures legal compliance by meeting financial reporting and tax filing requirements. Effective bookkeeping aids in budgeting and planning, allowing for accurate budget creation and future expense and investment planning. Additionally, it helps track your business's growth and performance over time, and simplifies tax preparation by keeping all financial information organized and readily available.
Here are some Key factors:
Financial Clarity
Budgeting and Planning
Preparing for Taxes
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