Are you wondering what the main objective of bookkeeping is? Bookkeeping helps to record financial transactions of a business in an organised way. Please read below for more.
Bookkeeping is the primary process of accounting in a business organisation. Bookkeeping plays one of the most important roles in creating accurate financial statements of a business entity at the end of the fiscal year.
Bookkeeping is important because it helps determine the profit and loss status of an organisation.
It will assist the accounting department in budgeting, financial planning, and forecasting – which are important functions for the growth of your business.
You can find out your tax liability and analyse the accurate financial position of your business with the help of proper bookkeeping.
You can easily detect frauds and errors of the business when you have an efficient bookkeeping team in your organisation.
However, most businesses prefer to outsource the bookkeeping function to a professional bookkeeping service in Australia due to the many benefits that come with such a decision.
This article provides information on the important features and main objectives of bookkeeping.
- Show permanent financial records of your business
- Shows the profit and loss of your business
- To know the current financial position of your business
Show Permanent Financial Records Of Your Business
The main feature or objective of bookkeeping is to maintain complete records of your business transactions by following the correct accounting rules and regulations in the country.
Permanent financial records are very important for the future growth of your business. It helps minimise errors and fraud that can negatively affect the growth of your company.
The bookkeeper will record all transactions of the business in a journal and then transfer it to a ledger through posting. There are different types of accounting and bookkeeping software for this purpose.
A reliable bookkeeping service uses the latest software platforms to maintain your accounting books accurately in the long run.
That’s why you need to rely on a third-party bookkeeping service in Australia when maintaining your account books.
Shows The Profit And Loss Of Your Business
Knowing the profit and loss status of your business is important for the proper functioning of the company. Bookkeeping helps you understand where your business stands in terms of profits and losses.
This is another objective or feature of bookkeeping. The bookkeeping team will make the trading and profit and loss account of your business. All the income and expenses of your business are shown in the profit and loss statement.
When your total revenue is more than the total expense, you get a net profit. Likewise, when the expenditure is more than the total revenue of your business, you will get a net loss.
The bookkeeping team will let you know whether your business is running on a net profit or loss. You can then take appropriate action to correct the situation if the company is running on a loss.
To Know The Current Financial Position Of Your Business
For a business, the mere understanding of the profit and loss status isn’t enough. The business owner should know the financial health of their business. That’s where the balance sheet comes in handy.
The bookkeeping team will prepare the balance sheet after preparing the profit and loss statement. The balance sheet shows the assets and their value on one hand and the liabilities and capital of the business on the other hand.
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