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What is bookkeeping?
To succeed in business, one of your most important tools is financial analysis, based on your business records. Accurate financial records will help you answer some very important questions. Are you making money, or losing it? How much? Is your business on sound financial ground, or are troubles lurking ahead?
Bookkeeping refers to the task of recording the amount, date, and source of all business revenues and expenses. Bookkeeping is essentially the starting point of the financial analysis and accounting process. Only with accurate bookkeeping numbers can meaningful accounting be done.
Purchases, sales, payroll, and other activities carried out by a business will generate documents. These documents include sales invoices or cash till printouts, purchase invoices and receipts, deposit slips, cheque stubs and bank statements.
Bookkeepers sort, organize and record receipts, payments and other information generated by your financial transactions using these documents. It is important to keep these documents safe because they support the entries in your books and on your tax return and because it’s the law.
An effective bookkeeping system will ensure that documents to support particular transactions can be easily found. This is done by using a good system for referencing, whether numeric or alphanumeric.
Bookkeeping records are later used to prepare management accounts and reports, complete VAT Returns, payroll records, year end accounts and tax returns.
Bookkeeping is important because the resulting financial statements and reports help you plan and make decisions. They may be used by some third parties (bankers, investors, or creditors) and are needed to provide information to government agencies, such as Her Majesties Revenue and Customs (HMRC). |
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