Double-entry Bookkeeping is a very significant concept that drives any accounting process in a financial statements of the company. Financial managers need to grasp this principle in order to monitor business accounting standards and assess audited financial statements. Using this reference to better understand the double-entry accounting and post-accounting activities succinctly.
What is Bookkeeping?
Bookkeeping is a formal documentation and compilation of the company’s financial operations that is intended to verify that all transactions are appropriate. Nevertheless, the financial statements are the end result of the accounting process, the basic material for which is the inclusion of business transactions recorded in the chart of accounts.
In other terms, bookkeeping includes tracking bank statements and other business-related factual data on a regular basis.
Why Bookkeeping is essential for business?
Bookkeeping is essential to help you retain reliable financial records. Nonetheless, several organizations often struggle to adopt this systematic method. Besides the fact that you are needed by statute to maintain correct books and records, doing so would save you stress later on. In reality, “bad accounting” is one of the key causes for business failure. You are deliberately running the company without planning or monitoring. You know why accounting is essential now. It might save you energy , time, and a headache. If you find yourself in need of an accounting procedure, try recruiting an accounting professional to support.
Accounting systems and financial reporting can be complex and confusing. Even the interpretation of a particular transaction may be vague.
What is double entry bookkeeping?
Double-entry bookkeeping is a bookkeeping method where each entry into an account includes the same and opposite entry into the different account. The technological advancement of systems and accounting software clearly demonstrates that much of the bookkeeping and accounting tasks have been taken away or are taking place concurrently.
For example, the processing of the sales invoice would immediately change the related general ledger (Sales, Accounts Receivable, Inventory, Cost of Goods Sold), change the comprehensive records of the customer and save the records for the financial statements as well as other reports.
Accounting software has been designed in such a manner that any account will have a debit equivalent to the value of the credit. Electronic accuracy often removes mistakes that happened while sums were recorded, copied and measured manually. As a consequence, the debits will always be equivalent to the credits, and the trial balance will always remain in balance.
No longer will hours be spent looking for errors that occurred in a manual system.
Bookkeeping can be simple with online accounting software like Abacus Financials. Try it free for 14 days!