What is bookkeeping?
Bookkeeping is the process of recording a day-to-day business transaction in the terms of accounting. It’s also said that booking keeping is the technique of recording or maintaining different transactions of the business. It’s the vital component of the business, as it keeps all necessary things related to the accounts. Bookkeeping is the only way to derive the final financial reports by updating the records daily into the books. Daily recorded entries will help at the time of audit of taxation.
Ways of Bookkeeping
Different types of bookkeeping exist, so you just have to make a decision first before starting bookkeeping. Two types of bookkeeping exist there, one is single-entry bookkeeping and the other one is double-entry bookkeeping. So the owner and accountant must have to make a clear decision before maintaining books of accounts. One just needs to check the requirement of their business if one is doing business then must go for the double-entry or according to check. Large organizations always choose double-entry bookkeeping services in Toronto.
Single-entry bookkeeping is the way of recording daily transactions in the books of accounts with a single transaction. Here only one entry can be done for each particular transaction. The single-entry transactions are recorded in the cash book. Basically, it is maintained only for tracking the result of the generated income and the expenses. One doesn’t need formal training for keeping single-entry books. It’s the entry keeping that suits small scale companies and business that needs a little maintenance for their business, as they don’t buy or sell the things on credit but runs their entire business on the cash transactions along with the little inventory.
Double-entry bookkeeping is one which too vigorous. It is the bookkeeping that can be done with the proper procedure. Here in this type of accounting two entries can be made for each transaction. These two entries are recorded as debit or credit. For example: if you are selling anything of $ 20 then your cash account will be debited by the $20 & your sales account will be credited by $ 20. Here in this book one will gets credited and debited with the same amount. In short, the debit and credit will always be equal. When you are maintaining such types of accounts then it’s balanced.
Cash Bookkeeping or Accrual Bookkeeping Service in Toronto
After choosing between the double-entry and single-entry bookkeeping one reached at another level of classification between cash bookkeeping or accrual bookkeeping, let’s check about it:
Here in the cash-based transactions, one only recognizes the revenue and makes entries when they receive cash or inside cash flow into their business. Similarly, expenses are noted down when they are paid or cash flows outside the business. In short, entries can only be made when the cash is entering into the business or existing from the business and all these entries can be recorded into the books of accounts. It simply shows that in this bookkeeping service Toronto will never let you record any credit transaction in the books until the cash is used.
Accrued Bookkeeping Method
Here in the accrual bookkeeping revenue can be recorded when they sell something or expenses are noted down when they are incurred. These are the entries in which the actual cash flow doesn’t exist. The credit sale and purchase of the things can be recorded here
Now, here you all will get to know about bookkeeping. It’s a must to maintain books of accounts for the businessman who is running a business. It is necessary to maintain the books of accounts because doing so will help in finding out the final financial results. So if one has to checkout after a particular period that is suffering from the profit or loss then he must have kept their book of accounts.
Now there are two types of bookkeeping exist one is single-entry and another one is double-entry. In the single entry system, only one entry is made for each transaction. In the double-entry two transactions are made for each transaction in the column of debit & credit. Most probably the small scale business records their entries in the single-entry method and large businessmen record their firm’s transaction in the double-entry system. It is because they deal in both cash and credit.
After finalizing the way of bookkeeping the next thing that appears is the basis of booking keeping. One is cash-based and another is accrual-based bookkeeping for the accounts. It depends upon the business owner that how he wants to record the transactions. If he makes entries only when the cash enters or exist in the business then it’s cash-based bookkeeping, or vice-versa.