What is Bookkeeping, Why is it Important & Why Should You Care?

 How would one feel in a state of stratagem, in a case of the audit, where because of negligence you fell into the hands of a so-called nasty bookkeeper, just because you think the art of bookkeeping is not of absolute importance? Are you reading this and you think you run  a small scale business or small company and that things are fine and you don’t take bookkeeping into importance,  I hate to break it to you, then you are going to jail!

Well, not that you are going to jail directly only if caught in the act of fraud or perhaps because of not keeping a proper record. Now that I think I have your attention I will captain you through this maiden voyage of information about bookkeeping. Well, we will discuss its purpose and its origin, some technical terms, why you need to take it seriously and how to prevent auditing agencies from preying on you.

What is book-keeping?

When you perform any transaction be it with or through street hawker selling junks or with a limited liability company that has employed so many people, records about the business deal should be made.

The process of doing this is referred to as bookkeeping and a person in charge of keeping those records is known as a bookkeeper. You surely would have heard of terms such as profit and loss, balance sheet, account payable and receivable, etc. well, they are the component and functions of bookkeeping.

All this dates back thousands or years ago, in the Babylonian era when records about sales are kept on the small slab of clays.  Egyptians are also known to keep records of grain amount going in or leaving the stores owned by their government. This process has been diversified, and they have become more involved, but the primary purpose of this act stands still. Click here !

Why bookkeeping is essential?

I can tell you know why books keeping is as important as staying alive. The first reason is that it serves as a parameter that is being measured to know the state of your business, the second reason why you and your business enterprise should involve in this act is that the law requires you keep some original financial records and report. Your company is obliged to keep these records for the range of some years.

The basics of legal book keeping includes

  • A purchase ledger which records expenses and purchases irrespective or where you have paid them or not
  • A sales ledger is a record of sales whether or not you have received the money
  • A cash statement which records how money enters or leaves the business
  • A salary or wage ledger which gives wages and national insurance expenditures
  • If your enterprise is VAT registered, you show particulars of the charges

Book keeping evolution and tools 

This is very simple, the larger your business, the more complicated your financial records will be , as your business grows so will their way of putting down financial records must change, even for a sales man selling materials of not so much value, financial records must be kept.

Though it is not as enormous companies that offer wide range of product range of product and employing over a hundred persons is sophisticated because intense demand of information and probing from both interior and exterior auditing agencies or department. Such big companies can employ the services of bookkeepers online via bookkeeperco.com.au.

How to prevent book keeping fraud

This means you should be vigilant and make sure of the state of your book keeping department, no matter how small or big your business is. A small company by it nature is less prone to less book keep fraud this instance is only possible if there few people and fewer systems. And so little manipulations and corruption occurs when absent.

The obvious strategy in preventing cases of fraud is by making sure what takes place in the accounts and also hiring people who are trustworthy bookkeepers Melbourne in every department in your business no matter the size of the business.

October 5, 2016

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