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What is bookkeeping / accounting?

Bookkeeping is the early stage of accounting of which it forms the part that deals with daily recording of financial data of a business. It involves recording transactions which includes making entries in a journal or ledger showing date, account name and amount; and making entries on the debit or credit side of accounts and the maintenance of accounts such as Cash account, Sales account, Accounts Receivable account, and expense and payable accounts. The bookkeeper must know how to record the data, and understands what he or she does.

Both bookkeeping and accounting track the incomes received and the expenses incurred with the intention to generate profit and avoid making a loss for a business, and the need to submit the accounts to the tax office.

Accurate accounting relies on correct bookkeeping. Proper accounting record must be maintained in order that the business can be better managed, and sensible and prudent financial decisions made. It is just as indispensable to prepare accurate financial statements, which reflect the financial and tax status of the business.

That a business must maintain proper accounting record is undeniable. The accounting information will be of interest to outside parties such as the bank which approves loan which the business is likely to apply for; tax officers who need to calculate the taxes payable; a prospective buyer of the business; a prospective partner interested to share ownership; and those who want to invest in the business. The owner is just as interested to improve the profitability of the business.

Last Updated (Saturday, 25 September 2010 18:24)