Bookkeeping



Objectives of a Bookkeeping System
Keeping track of how your business is going is not difficult if you have in place a good bookkeeping system.
 
Your bookkeeping system has the following basic objectives.
  1. To keep track of all income and expenses and increase the chances of your business making a profit

  2. To collect all the necessary financial data from your accounts so that financial statements can be drawn up and a profit arrived at for taxation purposes.
The actual process of keeping your books involves 3 steps:
  1. Keep receipts or other acceptable documentation which confirms the receipts and payments of your business

  2. Make sure you summarise your income and expenditure for each period

  3. Complete summaries for your accountant or financial adviser so that financial statements and annual reports can be completed

Bookkeeping Goals
While keeping track of your business transactions and finances may seem to be a difficult task, it’s not really that hard once you know the basics. 
 
Bookkeeping has 2 main goals:
  1. To keep track of all the income and expenses of a business.

  2. To collect other necessary financial information about the business so that other processes, such as tax returns, dividends to shareholders, or repayment of loans etc, can be carried out.
While the goals appear to be simple enough, in reality how these goals are achieved is a little more complex.  The basics of bookkeeping have been around for hundreds of years and over that time they have been fine-tuned and developed to an extent where bookkeeping systems are uniform and standard wherever you are operating your business in the world. 
 
While there is no requirement for your bookkeeping records to be kept in any one particular way, the objective is that your books must show accurately the income and expenses of your business, the position of assets and liabilities, and other information such as loans by the business, etc.
 
There are many reasons that contribute to the failure of a business, but it is a fact that the high failure rate, especially of new businesses, is directly due to the lack of good bookkeeping systems.  Survival in today’s aggressive and competitive marketplace is, to a large extent, reliant upon the accurate and timely production of information that reflects the financial condition of your business. 
 
It therefore goes without saying that a sound bookkeeping system is a must for any business, especially a new business.