Accounting and bookkeeping are quintessential to any business. It forms the very core of financial management that assists you in determining your profits and losses and ensures that routine expenses and receivables are duly managed. Managing business finances and recording the same is a cumbersome process and requires quite some expertise by the person handling the same. In the light of the same, nowadays, accounting and bookkeeping services that perform the exclusive job of handling business accounts are springing up. These agencies act as third parties and handle financial records right from bookkeeping to statutory compliance as well as monthly financial reports. The primary aim of big businesses transferring their bookkeeping and accounting jobs to such specialized agencies is so they can save costs and concentrate on their core business policies. In this article, we tell you all about bookkeeping and accounting and how the two are different from each other. We also throw some light on the importance of accounting. But first, let us understand the life lessons that accounting and bookkeeping services taught us.
One great benefit of hiring bookkeeping and accounting services is that you are aware of the amount that you might have to pay as taxes well in advance. Preparing for such taxes before time can help you avoid delays and associated penalties and costs.
7 Important Life Lessons Accounting & Bookkeeping Services Taught Us:
Here are some of the most important principles that accounting and bookkeeping services made us know:Organize your records
One of the foremost principles of running a successful business is staying organized throughout the year by keeping a track of the expenses and receipts that can be submitted to the bookkeeping and accounting services from time to time. This also helps you keep a track of your finances thus avoiding chaos in business operations.Keeping Track of Financial Data
Bookkeeping and accounting services have also taught businesses to look into their financial records at periodic intervals so that any discrepancy can be taken care of at the earliest. Such assessment is quite useful in the furtherance of policy making and deciding the future course of the business.Plan Funds for Taxes
One great benefit of hiring bookkeeping and accounting services is that you are aware of the amount that you might have to pay as taxes well in advance. Preparing for such taxes before time can help you avoid delays and associated penalties and costs.Resolve Errors At the Earliest
Another advantage of bookkeeping and accounting services is that they help you recognize errors of omission, commission, or duplication at the earliest so that it does not affect the business adversely in the long run. Proper scrutiny of books of accounts helps business entities circumvent any major or minor errors detrimental to the business' interests.Save Human Resource Costs
Bookkeeping and accounting services are extremely valuable in saving costs since businesses can directly hire such services without having to specially recruit persons who have to deal with the finances. This greatly helps them save up office space as well as lower employee count.Appropriate Accounting Method
Bookkeeping service agencies are highly professional and thus keep themselves updated with the latest and legally applicable norms such as changing accounting methods, etc. They help the business steer clear of worries by taking complete care of the tools and programs to be used while recording accounts.Flexibility
Businesses that are seasonal do not have to spend a fortune by hiring employees to deal with bookkeeping all through the year. Bookkeeping and accounting services can be hired only during relevant business cycles thus saving the business a great deal of money.What are the 7 Steps of Accounting Cycle?
- Analyze the business transaction.
- Journal entry of such transaction.
- Preparing ledgers of journal entries.
- Preparing trial balance.
- Making financial statements.
- Post closing entries in journal.
- Preparing closing trial balance.
How Does Accounting Differ from Bookkeeping?
| Bookkeeping | Accounting | |
| Definition | Refers to identifying and recording financial transactions. | Refers to summarizing, interpretation, as well as communication of financial transactions. |
| Objective | To record financial transactions systematically. | Analysis of financial situation of company. |
| Business Decision | Not relevant in decision making. | Extremely helpful in deciding future course of action. |
| Skill | Not much special skill required as compared to accounting. | Analytical skills imperative to study financial statements. |
| Type | Two types- single entry and double entry | Two types- Accrual and cash basis of accounting |
What Is the Importance of Accounting?
- It is often referred to as ‘language of the business’ as it helps figure out the net profit or net loss for a certain period.
- Determines the financial position on a certain date thus determining the balance of assets and liabilities.
- Outlines the cash flow in the business with respect to investing, operating, as well as financial activities.
- Essential as per statutes and legal mandates such as Companies Act, 2013.
- Helps in financial planning and projections.
- Relevant for taxation purposes.
