The term bookkeeping basically refers to utilizing recording mechanisms designed to keep track of your business’ financial operations and transactions. While difficult and mostly irritating to execute, regular and accurate bookkeeping is a crucial element of any business entity. The basics of bookkeeping constituting these primary elements:
This element stands at the center of bookkeeping as it is usually known, the idea being to tally a business’ daily income, specifically recoding those transactions that will result in payment, either immediately or in the future. It is common for businesses, large and small, to automate this process, systematically recording all sales transactions and following up on each transaction individually (for large but limited sales) or tallying voluminous sales generally at the end of each day.
Tracking income is considerably important when dealing with multiple branches of a single business, crucial in keeping an eye of gross income periodically.
Expenses refer to those elements-materials, labor, advertising, rent- that will result in costs being incurred by a business’ profits, costs imputed to activities likely to benefit the business’ future. It is important to tally your expenses over a given period of time, determine their effect on gross income in percentage.
Accounts Receivable and Accounts Payable
Accounts receivable are those portions of bookkeeping responsible for tracking delinquent accounts of customers yet to make payments for transactions already made. Accounts payable track expenses, taking note of payments that must be made by the business over a given period of time, be it utility bills or invoices of items purchased on credit.
Tallying either section of your books is crucial in allowing you to keep track of the inflow and outflow of money from a given company.
Because all businesses incur tax on each transactions but do not make payments as frequently, it is important to keep a tally of all tax obligations that are likely to accrue over a given period of time, be it over a week, month or year. The idea is to make it that much easier to keep up with the specifics of your tax obligations, more than ready to act where necessary to clear payments as required.
Bookkeeping is such an integral part of business that even the slightest errors can bring about catastrophic derailments; trust is a key component, along with competency, if one is to achieve a state of peace and satisfaction in placing trust in those financial records kept by employees that may or may not prove trustworthy.