DEFINITION OF BOOKKEEPING
Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, and payments by an individual or organizations.
Bookkeeping share two basic goals :
to keep track of your income and expenses, which improves your chances of making a profit.
to collect the financial information necessary for filing your various tax returns.
► SINGLE-ENTRY BOOKKEEPING SYSTEM
Single-entry bookkeeping is a simple system where the revenues and expenses are recorded in a single column only a consolidation is done. The main disadvantage of single entry bookkeeping is that individual values cannot be got, so only the profit loss can be calculated. Single entry bookkeeping cannot be related to a balance sheet so finding the actual financial position cannot be got from this bookkeeping, to find errors it take lot of effort.
► DOUBLE-ENTRY BOOKKEEPING SYSTEM
The thumb rule for double entry bookkeeping is that at least two accounts gets affected where one account is debited and the other is credited for each transaction taking place. Say when an organization receives revenue under an account named X the amount is credited in the account X. if paid in cash it is debited from the cash account or the amount is yet to payed it is debited from accounts receivable.
ABBREVIATIONS IN USED BOOKKEEPING
A/C - Account
A/R - Accounts Receivable
A/P - Accounts Payable
B/S - Balance Sheet
c/d - Carried down
b/d - Brought down
c/f - Carried forward
b/f - Brought forward
Dr - Debit
Cr - Credit
G/L - General Ledger; (or N/L - Nominal Ledger)
P&L - Profit & Loss; (or I/S - Income Statement)
PP&E - Property, Plant and Equipment
TB - Trial Balance
VAT - Value Added Tax
TDS - Tax Deducted at Source
MAT - Minimum Alternate Tax
EBIDTA - Earnings before Interest, Depreciation, Taxes and Amortisation.
EBDTA - Earnings before Depreciation, Taxes and Amortisation.
EBT - Earnings before Taxes.
EAT - Earnings after Tax.
Three Steps to Keeping Your Books :
Step One: Keeping Your Receipts
Each of your business's sales and purchases must be backed by some type of record containing the amount, the date, and other relevant information about that sale. You'll use these to create summaries of your transactions.
Step Two: Setting Up and Posting to Ledgers
A completed ledger is really nothing more than a summary of revenues, expenditures, and whatever else you're keeping track of (entered from your receipts according to category and date).
On some regular basis--like every day, once a week, or at least once a month--you should transfer the amounts from your receipts for sales and purchases into your ledger. This is called "posting;" how often you do this depends on how many sales and expenditures your business makes, and how detailed you want your books to be.
Step Three: Creating Basic Financial Reports
Financial reports are important because they bring together several key pieces of financial information about your business in one place. Think of it this way: while your income ledger may tell you that your business brought in a lot of money during the year, you may have no way of knowing whether you turned a profit without measuring your income against your total expenses. And even comparing your monthly totals of income and expenses won't tell you whether your credit customers are paying fast enough to keep adequate cash flowing through your business to pay your bills on time.
BOOKKEEPING RECORDS ON CASH OR ACCRUAL ACCOUNTING BASIS
Bookkeeping based upon cash accounting principles is the easiest accountancy practise but not necessarily the most accurate or beneficial for tax purposes for the business. This is because cash accounting adopts the date of financial documents such as sales invoices and purchase invoices as the automotive date for those primary financial records to be entered into the accounts.
BOOKKEEPING SERVICES IS IMPORTANT TO ALL SMALL AND LARGE BUSINESS
To set up business is very important but to handle a business as successful runner is also extremely complex thing in bookkeeping outsourcing company for the reason that of it will take a lot of hard work and incredible task. A exacting thing needs to find out that are included tackling any type of organization and each area of department can make an important and best work carefully. In this instance it is not easy to running a business task. Bookkeeping and accounting department is extremely significant so it is recommended that the applicant of that department is perfect. The bookkeeping and accounting department is given the significant to financial applicant in any bookkeeping and accounting outsourcing organization.
Accrual accounting is based upon recording all financial transactions and then adjusting the end result to determine the most accurate net taxable profit. The accruals basis is favoured by accountants as it reaches an accurate tax liability as opposed to more or less tax being payable on the cash basis according to the credit control policies and practises of the business its suppliers and clients.