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Accounting is the systematic process of recording, analysing, and interpreting the financial transactions. It is the responsibility of every business – whether large or small to furnish their accounting records to the Income Tax Department. Generally, startups neglect these issues and, after a few years, they are forced to deal with them, plus interest. It’s always a good idea to keep track of your finances and provide information to government organisations to avoid difficulties like raids and fines. Companies are required to update the annual returns regularly.
Bookkeeping is the process of recording your company’s financial transactions into organised accounts on a daily basis. For a number of reasons, bookkeeping is an important aspect of your accounting process. Companies can track all information on their books and make key operating, investment, and financing choices with proper bookkeeping.
Individuals who manage a company’s financial data are known as bookkeepers. Companies would not be aware of their current financial situation or internal operations without bookkeepers
| Bookkeeping | Accounting | |
|---|---|---|
| Definition | The basic purpose of bookkeeping is to identify, measure, and record financial transactions. | Accounting is the process of analysing, evaluating, and conveying financial transactions that have been recorded in a ledger account. |
| Decision Making | The data provided by bookkeeping is insufficient for management to make a judgement. | Management can make key company decisions based on the data provided by the accountants. |
It assists organisations in efficiently controlling the company's income and expenditure while monitoring managerial policies and goals.
Helps in measuring the performance of the business in terms of key measures such as net profit, sales growth, and so on.
Keeping track of the money that comes into the business on a regular basis helps in projecting patterns, paying employees and suppliers, repaying debts, etc.
Investors will gain a better understanding of the business's financial health, including its solvency, creditworthiness, liquidity, stock, and bond issuers.
In India, the Registrar of Companies requires a strict record of income tax payments at the end of the year, failing which companies may face additional taxes or fines.
Bookkeeping deals with the financial aspect of the transaction. There are various bookkeeping softwaresthat helps the organization in recording financial transactions. There are various book-keeping activities which need to be performed with such as:
The process of Bookkeeping involves-
Two types of Bookkeeping
The purpose of Bookkeeping is to keep a track of the company's income and how the company spends that money. Bookkeeping is the process of maintaining the day-to-day record of the company such as handling the income and payment of bills, managing the sales and collection of payment from customers, and payroll processing.
Software is just a medium to record transactions. Our team has an expertise of more than 50+ softwares. But majorly we use
A bookkeeper is foremost responsible for recording the day to day transactions of a business. Whereas, an accountant is responsible for providing business advice at a higher level, i.e. Business structuring, tax planning, and compliance. The bookkeeper works apace with the accountant to assure that all the business transactions are recorded and transacted in conformity with the accountant’s advice.
You should hire a bookkeeper as soon as you begin your business. This way you’ll avoid mistakes from the starting and reduce headaches.
No way! You shall still maintain 100% control of all decisions and all checks will still be signed by you. You choose what merchants get paid and when. We provide with the data and perform the specific task, but you approve all receipts for payment and sign all checks.
3 . When should I hire a bookkeeping service?
You should hire a bookkeeping service as soon as you start your business. This way you can avoid mistakes from the beginning and thus reduce headaches. Depending on your needs our bookkeepers can complete an entire year’s bookkeeping in as little as 3 hours’ time. If its so simple, can you do it in less time?
If you own a private limited company, then it’s recommended that you hire a professional bookkeeping service. Bookkeeping requires the use of double-entry journal accounting to ensure that the Trial Balance is correct. As a private limited company, whether you have one member or fifty members, the compliance, accountability and accuracy should be the same.
Bookkeeping is relatively inexpensive and is crucial to the success of your business. It is important to keep an accurate record of your income and expenses, so you can make the right decisions at the right time thus reducing preventable losses. Small businesses are especially vulnerable in this area as they perceive great compensation from this exercise but underestimate the true value of labour and materials required. You would be better off with a bookkeeping service that will accept your receipts every two months and keep you profitable.
You must treat these as two separate businesses with two separate books of accounts. It is simple and clear rule that each business has its own books of accounts and GST registration as well. Also, each business requires its own separate business bank account.
Books of accounts comprise of a Journal, a Ledger book, a Trial Balance, Original and carbon copies of bills/invoices/receipts /, Cash Book, Profit and Loss A/c, Balance Sheet and Cash Flow Statements.
Companies and LLPs are required to maintain books of accounts as mandated by their governing statutes, namely Companies Act, 2013 and Limited Liability Partnership Act, 2008. Further, Income Tax Act, 1961 also obligates the maintenance of the books of accounts, irrespective of the form of business, and has separate provisions related to it. Thus, there may be a situation where a Private Limited Company is required to comply with such legal provisions as well.
Yes, you are on the right track as you that would imply that you are preparing a part of books of accounts. But it does not cover all your transactions, so in order to keep records of all the transaction you need to maintain additional books of accounts like Journal, Ledger, Trial Balance, Cash Book, P&L A/c, Balance Sheet and Cash-flow Statements in commonly accepted accounting software, such as Tally, Zohobooks, etc
If accounting is the product, accounting standards are its manual. Accounting standards are enacted and published by The Institute of Chartered Accountants of India which are meant to be followed by businesses for true and fair recording of their transactions. All accounting standards are not mandatory for all forms of businesses. Simply put, the bigger your business, the number of accounting standards which need to be followed.
No, you don’t have that option since you are legally required to maintain books of accounts irrespective of profits or losses. Not earning revenue cannot be an excuse for non-maintenance of books of accounts. In fact, as long as you are entering into financial transactions, you need to record the same. Another reason for maintaining books of accounts in the years of losses is that you can file income tax returns for the same and claim the benefit of setting off losses in the future years of profit.
Yes, you have an option of manually recording your transaction. It is not at all obligatory to do it through any specific software. But it’s always advisable to maintain accounts on a specific software to eliminate any errors or miscalculations.
No. An individual and a business are two completely separate legal entities. You may be a major shareholder of the business and an employee at the same time, but you cannot mix your own account with the accounts of the MNC. You have to be very clear about the fact that once you transfer anything owned by you to the business, it will from then onwards be treated business property. Hence, separate accounts should be maintained for individuals and businesses. Its would be a prudent practice to maintain separate bank accounts also to ensure flexibility and transparency.
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