The Basics of Accounting and Bookkeeping

Accounting and bookkeeping share the same goals: (1) to keep track of your cash flow, thus giving you the chance to improve productivity, and (2) to collect your business’ financial data for filing various tax returns and tax registration papers.

Sounds pretty basic, doesn’t it? Well, it can really be, especially if you keep these goals in mind whenever you feel overwhelmed by the details of your financial records. Whether you’re doing your accounting on ledger sheets or using accounting software, they follow the same principles.

1. Keeping Receipts

A summary of your company’s expenses and income is the heart of the accounting process. Every sale and purchase must be supported by some type of record that contains the amount, date, and other relevant information about the product. Whether you keep slips in a drawer or in a computer system, make sure not to lose these documents as they will serve as support to the figures in the business report.

However, practically speaking, you’d want to use a system that fits to your business’ needs. Basic ledgers can work just fine for smaller records, but for a company with more sales and expenditure, an accounting software package would be an ideal option for your company.

2. Setting Up and Posting to Ledgers

A completed ledger contains a summary of financial income, expenditures, and other important details of the things you’re keeping track of. Later on, you will use this summary to answer specific financial queries about your company, such as whether you’re making a profit and how much you’re making in a certain span of time.

Setting Up Ledgers. For hand-entry system, ledger pads can be used. Alternatively, for a more efficient data entry, you can purchase an accounting software package, which can generate its own ledgers as you enter your information. Any Singapore business can make use of these computer-based Singapore accounting software programs to make bookkeeping easier and more secure. Once you have entered your daily, weekly, or monthly postings, accounting software makes preparation of monthly and yearly financial reports much easier.

Posting Schedule. On a regular basis—perhaps every day, once a week, or once a month—you should transfer the amounts on the receipts of sales and purchases into the ledger, which is called ‘posting’. The frequency of doing this depends on how often you make sales and/or purchases and how detailed you want your record to be. For Singapore businesses that only make a few large transactions a month, such as a web design company and swimming pool repair company, a weekly or a monthly posting would be fine.

3. Creating Financial Reports

Regular financial reports are critical records as they bring together key pieces of your company’s financial status. Yes, your income ledger can tell you that your business makes a lot of money during the year, but do you know if you’re making a profit with all the expenses you make?

Creating even the most basic financial reports makes it easier for you to see how much you’re making in a certain amount of time by measuring your income against your total expenses. Financial reports combine data and summarize it to get a bird’s eye view of your business. Using an accounting software program will let you easily create the relevant reports you need, such as cash flow analysis, balance sheet, and profit and loss forecast.

Accounting and bookkeeping are crucial elements of managing a business. Figures and information entered into these records must be accurate and truthful to every transaction made by the company. To ensure flawless records and faster processes, make use of a computer-based system and take advantage of today’s cutting-edge accounting software programs.