What is Accounting & Bookkeeping and Its Purposes?
While the terms accounting and bookkeeping are used interchangeably, bookkeeping forms the foundation of accounting.
Here are how accounting and bookkeeping are different.
While bookkeeping is more about the recording of financial transactions as required by law and for taxation purposes, accounting involves the reporting of the financial affairs of a company during a particular period.
Bookkeeping is an integral part of accounting, while accounting is more business-oriented.
Tools for decision making
Bookkeeping itself does not allow you to make decisions. Decisions are taken based on accounting.
Financial statement preparations
While data for preparation of financial statements, like the Profit & Loss account and Balance Sheet, are provided by bookkeeping, the statements themselves are part of the accounting process. The data is taken from journals and ledgers.
Bookkeeping follows the single or double entry system. Accounting comprises financial accounting, human resource accounting, cost accounting, and management accounting.
Bookkeeping ensures that all financial transactions that an organization enters into are recorded systematically. You can get a clear picture of the income and expenditure for a given period. The transactions are posted in the concerned ledger for preparing a trial balance.
Accounting takes the information from bookkeeping to classify them under the respective heads for preparation of financial statements, like the Profit & Loss account and balance sheet. These financial statements provide an accurate picture of the financial health of the organization to stakeholders, like investors, creditors, employees, suppliers in a specific format for a given period.
Importance of Accounting and Bookkeeping Services
There are several reasons why accounting and bookkeeping are essential for your business-
It would help if you planned your finances to ensure that your revenues match your expenses. With a budget, you have a clear picture of whether you are deviating from the estimates and the corrective measures to be taken.
Filing tax returns
The financial information required for filing tax returns for your business is made available through bookkeeping. All the data is recorded systematically, so there is no last-minute rush.
When all the information you need is available easily, you can file your returns on time. You will not have to pay any penalties or fees to the regulatory authorities.
The stakeholders of your company, like investors or lenders, would get the information required on time, which helps build a positive image, and you will have no problems with getting loans or investments. Investors will be able to make more informed decisions regarding further investments.
The information obtained through bookkeeping is used in accounting to prepare critical financial statements, like the profit and loss account and balance sheet. Through these financial statements, ratios, like current ratio, total debt to equity ratios, inventory turnover or capital structure ratios, etc., can be calculated. This will help you analyze your liquidity position, improve your debt collection and payments as well as keep control over expenses.
Improved decision making
Accounting and bookkeeping help in better decision making. It helps identify areas that are not performing well, and thus takes the actions required for better results.
Focus on business growth
If you outsource your accounting and bookkeeping function to a professional firm, you can pay more considerable attention to your business by providing improved services to your existing clients and expand your business. This will lead to higher profitability.
Every business is subject to audit, and if your financial records are not in order, then there is a possibility of a penalty by the regulatory authorities. With proper bookkeeping services, you will not face any hassles with an audit.
Improved cash flow
When you have the right accounting and bookkeeping system in place, you can track your receivables and payables on time. You can extend the credit period for customers and continue it for vendors, so you don't face a cash crunch.
Give Your Business the Edge With Accounting and Bookkeeping Services
If you need to concentrate on your business, then it is advisable to let a professional outsourcing firm handle your accounting and bookkeeping responsibilities.
If you are looking for accounting and bookkeeping services in India, then you can consider us, at Paysquare. We have decades of experience in outsourcing when it comes to accounting and bookkeeping services. At Paysquare, we provide end-to-end solutions.
The services we provide include:
- Regular updating of books of accounts
- Calculation and payment of statutory dues
- Handling auditor queries and preparing books of accounts for audit
- Accounting for invoices
- Accounting and maintaining registers for fixed assets
- Preparation of financial reports like balance sheet and profit and loss account
- Preparation of MIS reports
- Bank reconciliation
- Employee expense reimbursement accounting
- Compliance with tax regulations like tax deduction at source
You will be provided with reports like a general ledger, a monthly MIS report, statutory provisions like provident fund, leave status and employee state insurance.
You will get benefits like automated handling of accounts payable and accounts receivable. As your ordering and billing will be integrated with your bank account, cash flow management will be better. Updating your accounts will be a streamlined process.
Paysquare will provide you with the latest technology, in-house team of experts in finance, protect you from any penalties while processing taxes, check for fraud, maintain accurate books of accounts and ensure that the latest regulations maintain by following your accounts.
So partner with Paysquare and take your business to the next level.