For business to be successful, it needs to record all its economic transactions chronologically without any emission or omission in the entry book. It helps a business to keep a tab on its dealings as well as inflow and outflow of the financial resources. Here, bookkeeping comes into picture. It undertakes the recording of financial transaction and involves preparing source documents for all transactions that are economic in nature, operations, and other dealings of an enterprise. It is not merely restricted to big business houses, forming the foundation of accounting bookkeeping are used in small as well as medium level business firms and non business enterprises. 3 Top Investment Schemes in India to put your money at!
For small businesses as well, a sound bookkeeping is an important prerequisite to keep all the financial transaction in check. It helps in regular valuation of the assets, tab on debtors and the borrowing activities of the firm. Bookkeeping also helps in keeping a check of embezzlement of funds and money laundering by an employee if any. Here are some tips for bookkeeping for small business:
Keep Personal and Firm’s Account Separate
The first and foremost principle of bookkeeping is to have a separate account of the business and the owner for financial purposes. Following the accounting principle of Separate Legal Entity, the accounts for both the entities should be different. All the transaction related to business should be done through enterprise’s account and not the owner’s personal one. 4 Smart Ways to raise fund for your startup without Investors.
Record Transactions Chronologically
One of the most prominent features of bookkeeping is that all the transactions are recorded timely and regularly. Ideally, all the dealing and financial events are recorded in the books of accounts on the day their occurrences. It also includes the accounts which are debited and credited after a transaction and a brief description about it. It helps the business to look for and clear discrepancies if any.
Organise Business Documentation
Various transactions are substantiated with relevant business documents including vouchers, bills, receipt among others. These works as an evidence to the transaction and provide various essential details about it such as the parties to the deal, date and time of the transaction, amount involves other terms and conditions if any.
Review the Records
To ensure that no fraud or miscalculation is taking place, a firm should keep reviewing its records on a regular basis. It helps business to evaluate all its transactions and accommodate for any omission or error in recording. It also enables the owner to keep a tab on expenses, account receivables, debtors, accrued income and other important accounts.