The Basics of Bookkeeping System For Small Business
Bookkeeping is a very essential function for all businesses. Normally bookkeeping uses in a sole trader business. Bookkeeping refers mainly to the record keeping aspects of accounting in a chronological order. Similarly, accounting is also included in essentials required for all businesses. Bookkeeping is just responsible for business transaction whereas accounting is responsible for classifying, summarizing and interpretation. For example, there is a small business bookkeeping service available in London. It needs some basic requirements. Small business bookkeeping service in London required to enter their detailed transaction with documents, then addition of financial effects take place, then the final step is to close it and prepare for next year.
There are two types of bookkeeping system for small business.
- Single-Entry Bookkeeping System
- Double-Entry Bookkeeping System
1. Single-Entry Bookkeeping System means the system in which there is the single entry of transactions. There is no twice system including debit and credit. It mostly takes place on smaller business.
Following are some basics of single-entry bookkeeping system For Small Business:
- Cash Book
- Profit-Loss statement
i) In Cash Book there are several columns for the entry of description, date, expense and total. Data is entered in it on daily bases, it means whenever there is any deal and transaction is held, bookkeeper should record description, date, expense and total. This is single honored bookkeeping system for small business.
ii) In Profit-Loss statement, bookkeeper must add the profit or loss in records on daily bases. This will help you to calculate and check the financial stability of the business.
2. Double-Entry Bookkeeping System means the company should enter the double transaction. This is a more advantageous system of bookkeeping. This is commonly used now-a-days. Debit and credit both are involved in it.
- Left and Right column
- Received and given profit
- Direct relation of debit and credit
In left there is a column of debit and in right there is a column of credit. We can put the value of debit on left and credit on right. As we know, debit is increasing of assets in a business and credit is the decreasing of anything.
In every business the gained profit is considered to be the sign of progress. Therefore, what we gain from business is profit and other than that you provide others is their profit.
3. Debit and credit both are interlinked. That means they both depend on each other. Whenever there is credit there must be the presence of debit.
Conclusion is this that, to run any sort of business, it necessary to run it with proper rules and regulations. without them, you can never get success. Similarly, bookkeeping can only be done successfully when you follow the basics of bookkeeping system for small business either it is in single entry system or double entry system.