My clients often ask me ‘what does bookkeeping mean?
They wonder if bookkeeping is something that they could perform while running their business.
If you are amid the start up phase of your business, you might wonder if bookkeeping is something that you could perform yourself while running your business. Whether or not you choose to employ a bookkeeper or are comfortable to bookkeep yourself, keeping your books in order is crucial to running any business. In fact, good bookkeeping practices will give you an excellent measure of how well your business is doing.
In the following article, I will explain what bookkeeping means, what are the different ways to bookkeep, as well as why it’s important to bookkeep.
What does bookkeeping mean?
Bookkeeping is a recording of financial transactions, which include purchases, sales, receipts, and payments by an individual or cooperation. Bookkeepers are responsible for accurately recording all the financial transactions of the business, whether it is a cash transaction or credit transaction. You would need certain skills and talents to perform a bookkeepers crucial job.
Bookkeepers must be detail oriented, be meticulous about accurately recording numbers in the books and it is to their advantage if they enjoy working with numbers. Bookkeepers must vigilantly maintain a paper or electronic trail, as well as filling and storing all essential backup data about the financial transactions recorded in the books.
What are the different ways to bookkeep?
A useful bookkeeping system is one that is easy to understand, simple to use, reliable, accurate, consistent and can provide you with the information you need in a timely manner.
The two different bookkeeping styles are: single entry and double entry bookkeeping
Single entry bookkeeping means that every dollar transaction is recorded only once, either as income or expense, an asset or a liability. All entries are recorded on a one page synoptic journal, also called a revenue and expense journal.
On the other hand, double entry bookkeeping means that each transaction is recorded twice, one account is credited with the given dollar amount and a second account is debited by an equal dollar amount.
You may use a one-write system or a computerized system to record your bookkeeping.
One-Write Systems are copyrighted systems are set up using carbon-backed cheques. As you write the information on a cheque, it also transfers the data to a record system.
Computerized Systems are programs that are advantageous because they usually have the ability to produce daily updated financial statements quickly and in versatile ways. Many of these systems are scalable, so you can add on as your business expands.
Why is it important to bookkeep?
It might seem tedious to record every financial transaction in your books, yet financial records can save you a great deal of effort and time in long run.
Good records will keep you up to date with your business’ past and present standing. They will assist you in making good business decisions. Good records will also help you meet different government agency requirements, which include: Canada Revenue Agency, Canada Pension Plan, Employment Insurance, Department of Finance, Goods and Services Tax and Workers’ Compensation. Additionally, good records will help you make accurate and timely remittances. Finally, good records will increase the probability that your business will survive, stay in business and earn profit.
If you require additional consultation or a tax planning strategy, please do not hesitate to contact us. We serve clients in Toronto, North York, Vaughan, Thornhill, Richmond Hill, and all other GTA cities.
Polina Presman, CPA, CA
T- 416-371- 6017
Shani Marzin, CPA, CA
S&P Accounting Services LLP
2727 Steeles Ave. W. Suite 300
North York, ON, M3J 3G9