Bookkeeping has two specific systems which are used daily by both small and large organizations – the systems are known as single or double entry bookkeeping.For small businesses a single entry system may suit your requirements, but if you have many transactions and need to keep on top of them, double entry bookkeeping could be for you.
How does it work?
Single entry bookkeeping is a simple, easy to action process which involves a single transaction being recorded. Each entry will reflect the debit or credit of cash to and from your company. It can keep track of your funds in a cost effective way, and is easily maintained with little effort. This process takes into account any receivables, payables, taxes and also records cash transactions. If you’re looking for a more in-depth process which will record inventory, expenses and revenue for example – you may wish to use a bookkeeper or double entry bookkeeping service. More details here.
Double Entry bookkeeping is a thorough way to balance your books. It offers the ability to record assets, liabilities and taxes in addition to expenses, revenues and inventory. When using single entry bookkeeping you record one transaction into just one column, with a double entry process it makes dual entries for every single transaction. For example, you can record a credit entry for revenue coming into the business, and a debit for the transactions which have been paid. Both entries will offset each other so that accurate figures can be maintained.
Other advantages over single entry bookkeeping include:
- Preparing financial statements easily due to credit and debit dual entry calculations.
- You can quickly determine the business’ financial position and commitments.
- It takes internal transactions into account too, making it easier to calculate taxes and fiscal information come the year end.
- Double entry bookkeepers offer detailed records of all assets, ensuring your business doesn’t lose track of valuable income.
- Important details cannot be missed out; each transaction is recorded twice in dual columns.
- It becomes easy to track who owes the company money and who you need to pay easily by detailing all sales and purchases.
- Checks are undertaken when transactions are recorded, this ensures the total amount of entries for debit, equals the total amount for credit. Wrongdoing and errors can be easily spotted, so your company doesn’t lose out.
Double entry bookkeeping is incredibly versatile and practical for detecting any errors or fraudulent behavior, if the bookkeeper logs the information correctly in the first instance, this is a fool proof way to ensure you company always stays ahead of the game. You will find your fiscal and financial records are all maintained with precision and correctness, you can keep a close eye on incomings and outgoings, profit and loss and organise your end of year taxes better.
Bookkeepers Melbourne are an organization who can help you stay ahead, with great advice on how to manage your business’ bookkeeping they are available to assist with any questions you may have. Take a look at their website www.bookkeeperco.com.au for further details.