BOOKKEEPING AND ACCOUNTING

With all the financial jargon being coined and thrown around in modern times, it can be hard to understand even the simplest of explanations about fundamental topics like bookkeeping and accounting. Also, because it’s within human nature to talk about things you might know very little about, you may have heard people give uninformed insights like “Bookkeeping and accounting are basically the same! But a little different…” To end your search journey once and for all, the bookkeeping experts at uGreenit are here to give you the simple run down on these critical business topics so you can get back to making money.

Are bookkeeping and accounting the same?

No! Simply put, both bookkeeping and accounting are disciplines wherein you log down all the money moving around your business.

Things like:

• Expenses

• Income

• Assets

• Liabilities

But they have different uses-bookkeeping is the day-to-day tracking of financial transactions, while accounting is a bigger picture approach to analyzing & summarizing those same transactions so that you can make informed financial decisions.

Why is bookkeeping important?

As stated earlier, bookkeeping is simply the process of recording daily financial transactions. An experienced bookkeeper will log each time you spend or make money and this is one of the most fundamental aspects of business. Keeping accurate records of your finances allows you to understand the financial status of your company, make smart decisions about growth, and plan for the future.

Just imagine, if you were uninformed about the money in your business, you would cost your business so much revenue by being disorganized and taking missteps.

Why is accounting important?

After step one of becoming organized through accurate bookkeeping, you may want to make more informed decisions about investments and expansion. This is what accountants help you do. Accountants utilize the records procured by bookkeepers to perform a variety of important business tasks such as:

• Ensuring that you are compliant with all relevant financial regulations

• Creating balance sheets

• Auditing books

• Tax preparation

Accounting is the process of interpreting financial records and turning them into useful insights, such as profits, losses and cash flow. Cash flow is simply a record of the amount of money coming in and leaving your business. Accountants do some of the work of financial planners but with a heavier emphasis on managing the money you already have rather than expansion.

How do bookkeeping and accounting work?

Now let’s cover the basic bookkeeping principles. These include the double-entry system, which means for every debit entry, there must be a corresponding credit entry. There are two types of accounts: asset accounts and liability accounts. Asset accounts are those that add value to your business, such as cash, equipment, inventory and property, while liability accounts are those that reflect what you owe to others, such as loans or credit cards. Finally, you need to keep track of income and expenses, which will help you to identify trends and make informed decisions.

Basic accounting principles

Once you have all your financial records in one place, you can start to analyze them. There are several key financial statements that every business owner should be familiar with, including the balance sheet, income statement and cash flow statement. The balance sheet shows your assets, liabilities and equity, while the income statement shows your revenues and expenses over a specific period, and the cash flow statement shows how much cash your business has generated and used during that time.

Now let’s discuss how to create a budget and track your progress. Budgeting is an important part of managing your finances and can help you to plan for the future. Start by identifying your fixed expenses, such as rent, utilities, and payroll, and then work out variable expenses, such as marketing, supplies, and equipment. Once you have created a budget, it’s essential to track your progress against your plan. This will help you to identify any discrepancies and make adjustments accordingly.

You may have heard of some popular software that can help you manage your bookkeeping and accounting. There are many accounting software options available, ranging from free to paid versions. These solutions are designed to help you automate and streamline your financial processes, making it easier to keep track of your income, expenses, and taxes.

You’re basically a pro now

Bookkeeping and accounting can be intimidating concepts for those who are unfamiliar with them. However, they are essential skills for small business owners and entrepreneurs to master if they want to keep track of finances, make informed decisions and avoid costly mistakes.Hopefully after this guide you can feel confident in managing your finances and making informed decisions for your business. Remember, the key is to stay organized, keep accurate records and track your progress against your plan. 

Let the experts help you out!

If after this guide you’ve determined that bookkeeping accounting services will benefit your business, click here to contact the experts at uGreenit who can help you out on your financial management journey with tailored bookkeeping services.