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Guide to Accounting : What Is Bookkeeping And Why Is It Important

what is bookkeeping

Bookkeeping is part of any business’s accounting and transaction process. Especially for the companies that are currently growing, they need to record all their financial transactions. When this process is not done properly, this will have an impact on the failure of a business. If you’re still puzzled, read on about, what is bookkeeping and why is it important? 

What is Bookkeeping?

Bookkeeping is important for any business industry. Without doing it, business owners will not know how their business is developing.

It includes recording various types of business transactions in the form of financial reports. These financial records include income, expenses, transfers of funds, etc. They must be well prepared and maintained into a ledger that records all of these financial transactions.

In addition, bookkeeping ensures all transactions recorded in the ledger comply with the applicable accounting principles. It can be done manually using a paper ledger and a pen. Or, electronically using a computerized accounting system. In fact, computerized bookkeeping is usually more efficient. It facilitates auditing and financial reporting processes more accurately and is more time-saving.

Bookkeeping is an important part of a company’s financial transactions. It helps identify any financial problems, monitor financial developments, and make the right financial decisions. It is also important to meet applicable taxation and financial reporting requirements.

5 Reasons Why Bookkeeping is Important

1. Business Analysis

When you read your company’s bookkeeping reports, you will be able to assess how your business is performing. Here, you can analyze the strengths and weaknesses of your business. Thus, you can easily make future business decisions.

2. Business Planning

You can do future business planning with great financial reports. A financial report can only be actualized when the bookkeeping process is running well. Hence, the data presented must also be accurate.

3. Company Money Turnover

Every data that has been recorded by accurate bookkeeping is useful for the company. You can read every information related to business bills that you have. You can find out about the company’s operating costs, the average amount of income, or the amount of unpaid receivables. As a result, you can analyze the company’s cash flow easily with this.

4. Decision-Making

Bookkeeping every financial transaction is useful for businesses as a tool for making decisions related to running a business. Thus, business owners can use it as a reference to make a decision.

5. Level of Profitability

The profit and loss report is one of the results of carrying out the bookkeeping process. Based on the report, you can see what level of profitability a company can achieve. This reflects on your company’s performance at that time.

Final Thoughts

What is bookkeeping? It is an important part of the financial management process for a business. Each of its records is evidence of the occurrence of all transactions. It performs tracking according to the records and according to the transactions that occur. Therefore, it would be very useful if you understand or even be able to arrange one.

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