Accounting is the process of keeping detailed records of all the financial transactions in your business. It’s also called bookkeeping.
Why does it matter?
Bookkeeping is important for several reasons:
- It gives you a clear picture of a business’ financial health.
- It helps you make smarter decisions about your business. You can, for example, use these numbers as a basis for budgeting.
- It provides investors, stakeholders, and tax authorities with the information that they need.
- It ensures that you file and pay the correct amount of taxes.
How do I do my bookkeeping?
Most businesses use accounting software—also called systems—for their bookeeping. There are many options on the market, so make sure to do some research to find one that suits you, and that’s also within your budget.
When you do your bookkeeping, you should make sure to follow what’s called accounting principles.
If you have questions about bookkeeping, you should reach out to an accountant. An accountant can give you specific advice suited to your business
Different types of accounting
There are different types for different scenarios. Let’s break them down:
- Financial accounting is the process of keeping track of financial transactions and cash flow in your business. It gives information to people outside the company, like investors or regulators, through financial statements such as balance sheets and income statements. Examples are GAAP or IFRS.
- Managerial accounting is bookkeeping for internal use. It helps managers make decisions within a business.
- Cost accounting is tracking, analysing, and understanding the costs related to daily business operations. It helps make sure that the money you’re spending is in line with the business’ overall goals.
- Tax accounting organises financial information for tax purposes. It ensures that a business financial records are in compliance with laws and regulations, and that you can file and pay the right amount of taxes.
