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A Business Owner’s Guide to Accounting and Bookkeeping Services

A Business Owner’s Guide to Accounting and Bookkeeping Services

Although there is a difference between accounting and bookkeeping, they are often used interchangeably. Anyone new in business would always hear the words accounting and bookkeeping. Since they are synergistic, small companies typically have accounting and bookkeeping functions.

In bookkeeping, a general ledger is used to post every business transaction. The ledger contains all the financial transactions of a business from its inception.

In accounting, all the information in the ledger is used as insights to create financial strategies and decisions.

Bookkeeping

Bookkeeping is a daily record-keeping of all the financial transactions of a firm. Small business accounting and bookkeeping are essential; even if your company is just a start-up, it needs to begin. Don’t wait till your firm grows into a big corporation before considering Dedicated Bookkeeping Solutions for small businesses

Posting is the term for recording all financial transactions or accounts. Bookkeeping tracks all the following accounts for financial statements and tax obligation purposes.

  • Asset Accounts – include both tangible and abstract items that your firm owns. Tangible assets may consist of laptops, vehicles, equipment, property, or buildings. While intangible assets may include copyrights, logos, or trademarks.
  • Expense Accounts – can consist of firm purchases to help create added earnings. Maybe service or products. In addition, expenses might be rentals, ads, and worker wages.
  • Income Accounts – or revenue, records all the cash earned from selling your products or services. It could additionally count the dividends from other financial investments.
  • Liability Accounts – can consist of company loans, overdue utility bills, outstanding debts, payment obligations to lenders, and other payables.
  • Equity Accounts – shows the current worth or company or business valuation. A simple formula is subtracting a business’s liabilities from its assets.

Bookkeeping Methods

A quality that stands out in bookkeeping is a stickler for accuracy. Even the most detailed bookkeeper can commit errors; that’s why they usually work under an accountant’s guidance unless the business is very small. Studies found that having external accounting or bookkeeping services is a big help for your company. Check out this home page to learn about bookkeeping solutions.

The two bookkeeping methods are:

  • Single-Entry System – involves a single entry of all company transactions in the general ledger. This system works best with small businesses with less revenue.
  • Double-Entry System – is the golden standard of record-keeping usually used by most business owners, accountants, and bookkeepers. This system is more thorough and complex than single-entry.

Accounting

Accounting provides the business owner with pertinent data concerning the business’s financial standing. It is a process that consists of measuring, processing, and communicating financial information. In addition, accounting also takes care of tax preparation and other necessary financial materials.

The accounting function can be outsourced to private accounting firms like the Dedicated Solutions team. Even in some local businesses, outsourcing accounting and bookkeeping functions is very common.

Accounting Methods

  • Cash Accounting – this kind is prevalent among small business proprietors. The only transactions posted in cash accounting are cash spent or cash received. A sale is posted when the payment is received, and an expense is posted when the bill is paid.
  • Accrual Accounting – under this process, transactions are posted when they are incurred instead of awaiting payment. The same goes with expenses, even if no payment is made yet.

Conclusion

Although accounting and bookkeeping are different, there are more resemblances than distinctions. They work on a common goal of enhancing the business’ financial situation. Both are tax compliant and have overlapping duties, especially in small businesses.

Accountants can take the role of bookkeepers, but bookkeepers can not be called an accountant unless with the proper education and certification. However, accounting knowledge is required in both disciplines.

Finally, a company of any size can significantly benefit from the services of an accountant or bookkeeper.