Every business should have a good bookkeeping system. Most business owners do not have accounting experience, so they are usually wary of dabbling into this area without the right resources and guidance.
To provide support and provide relief to business owners in this category, we have created this bookkeeping services guide to ensure you are well-equipped and confident to begin the bookkeeping process.
The topics to be covered in this guide includes:
- What is Bookkeeping?
- Why is Bookkeeping Important?
- Practical Steps to Bookkeeping
- Key Takeaway
What is Bookkeeping?
Accounting can easily be defined as the process of recording a company’s financial transactions. A company’s financial transactions including issuing sales invoices, collecting supplier invoices, and adjusting salaries and payments to consultants. The accountant’s job is to classify, process, and coordinate these financial transactions using manual accounting methods or cloud-based accounting methods.
Accounting and bookkeeping are often confused with the same meaning. Unfortunately, bookkeeping and bookkeeping have different meanings. The accountant role involves processing day-to-day financial activities, and the accountant role involves summarizing and analyzing the data generated by the accountant using financial tools.
In summary, the purpose of bookkeeping is to ensure that financial transactions are accurately recorded so that accountants can perform accurate analysis and interpretation for decision making.
Why Is Bookkeeping Important?
- Tax Reporting Requirement: As a business must disclose its total assessable profit to the authorities, bookkeeping is the first step in doing so. Proper bookkeeping makes the tax reporting process easier.
- Routine Bookkeeping: Ensures that all business transactions are recorded as soon as they occur. When suspicious transactions occur, internal fraud can easily be detected. With proper bookkeeping and internal controls, investigating these suspicious transactions takes less time.
- Cost-Effective Fees for Audit: Holding up till the conclusion of your monetary year to plan your company’s book could be an exceptionally unsafe hone. The initial estimating offer from benefit suppliers could appear appealing, but spontaneous extra costs will emerge amid the errand. Asides from the mistakes related to planning bookkeeping at once, the time figure is an important angle to consider. The Inland Income Division in Hong Kong incorporates a charge recording due date for all businesses. Holding up till the company’s year-end to plan the bookkeeping limits the time accessible for the arrangement of the yearly bookkeeping and review report. Since late accommodation of the company’s money-related report is subject to punishments and indictment, it puts your company in an unfavorable position.
- Always be Investor Ready: For start-ups and little businesses, it is exceptionally imperative to plan normal bookkeeping with the utilize of a bookkeeping framework that can produce money related and commerce reports right away. By guaranteeing that bookkeeping is done frequently and precisely, the commerce is continuously prepared to share its numbers with potential financial specialists. This ventures a great company picture for commerce and encourages decision-making.
- Minimize Error: Bookkeeping guarantees that monetary data is kept in a deliberate way. This guarantees that mistakes or lost records are spotted effortlessly and rapidly. These days, paper recording is presently being staged out and cloud capacity frameworks are presently in fashion. When archives are put away in a coherent design (i.e., by months, concurring to the chart of accounts, or concurring to the exchange date), mistakes can effortlessly be identified as before long as they happen.
Steps for Process Bookkeeping.
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Choose your financial year-end date.
A money-related year is any yearly period at the conclusion of which a company’s accounts are closed. A monetary year-end date means the completion of the 12-month bookkeeping period for a company. Choosing a monetary year-end as the primary step to bookkeeping makes a difference with bookkeeping and assessment arranging. Once the year-end date is affirmed, the bookkeeper prioritizes superior and animates the bookkeeping and bookkeeping process.
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Separate business and personal expenses.
Once the monetary year-end and bookkeeping period are affirmed, at that point it’s time to sort, record, and record money-related exchanges related to the commercial operation as it were. Individual costs ought to not be considered in planning bookkeeping for a trade. As it were trade costs that are utilized within the generation of trade pay are deductible in Hong Kong.
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Select a preferred bookkeeping tool.
Choosing a bookkeeping device depends on the resources open to commerce. Within the occasion that the commerce is in a blocked-off zone with constrained get to to the internet, bookkeeping can be organized physically with cashbook registers and records. In case of commerce has get to to the internet, it’s best to utilize a cloud-based bookkeeping program for bookkeeping.
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Prepare the Charts of Account.
On the off chance that you’ve got chosen a cloud-based computer program like Xero, setting up the charts of accounts will be the next step. A chart of accounts may be a list of all the monetary accounts that make up the common record of a company. A chart of accounts Includes revenue account (sales, commission, service income), expenses account (Cost of goods sold, Advertising, Wages, etc.), Asset (bank account, cash account, plant, machinery account, etc.), and liabilities (loan account).
The chart of accounts for a trading business will contrast from that of service-based commerce. This makes the got to set up the chart of accounts that works best with the trading nature of the company.
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Start Recording the financial transactions.
Once the essential setup of your favored accounting tool is done, at that point the method of bookkeeping can start. All budgetary exchanges related to the trade must be recorded and accommodated to guarantee the precision of money related articulations.
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Generate the financial statement.
After the bookkeeping for a period is completed, the financial statement can be generated and analyzed. The basic financial statements used by most businesses include the income statement, balance sheet, cash flow statement, and statement of equity. Your accountant can analyze these statements for business decision-making activities.
Your bookkeeper can analyze these articulations for trade decision-making activities. If the commerce does not have an in-house bookkeeper, you’ll look for the administrations of a Certified Public Bookkeeping.
Key Takeaways
This guide is intended to provide you with the basic information you need to get started with bookkeeping for your business.
If you are handling the company’s bookkeeping internally or outsourcing it, you should use a system that allows two-way communication.
Making informed decisions based on data available is one thing, but managing financial information accurately is another.
Businesses should work with a bookkeeping system that allows them to see the status of their operation in real-time and automates manual tasks.
Interesting Related Article: “6 Common Bookkeeping Pains for Law Firms“