Over the years, I have met many clients who came to me to provide accounting and bookkeeping services. In many instances, I have had to go back three or more years and ‘redo’ the transactions in their accounting software, although they had a bookkeeper who was maintaining the books for those years. It is important that a business owner ascertain that proper bookkeeping and accounting is maintained as this is critical in assessing the financial viability of the company and also in keeping track of the debts of the company and any outstanding receivables. Often, bookkeeping and accounting is used interchangeably, and while both are financial tools used to record business transactions, there are some differences that are important to understand. There is an old adage ‘You Get What You Pay For’ and many business owners, not realizing the importance of keeping proper records, will hire someone to keep their books mainly on the cost, because the rate they charge is considered cheaper. Many times, this turns out to be a very expensive learning lesson. If that person does not understand accounting and is only enter the transactions, without the proper knowledge and experience, then more likely than not, the transactions being entered will not be properly categorized. For example, if a transaction that belongs on the balance sheet is reported on the income statement, this will result in an inaccurate representation of the Company’s financials. Which bring up another old adage “Garbage In, Garbage Out”.
Bookkeeping is the process of recording the business transactions from bank statements, credit cards, invoices billed, and other source documents. In bookkeeping the process is mechanical and does not usually require an analysis of the transactions being recorded. In a nutshell, the process of bookkeeping involves recording in an accounting system such as QuickBooks, or manually, incoming payments received and outgoing payments made.
Accounting involves all the processes performed in bookkeeping, but includes additional procedures and analysis. Therefore, bookkeeping is in fact, a part of the accounting process. Accounting includes preparing financial statements, such as the balance sheet, which includes the assets, liabilities, and equity of the company, and the Income Statement, which reports the income, expense, and net profit or loss of the company.
If you are located in the Laurel, Beltsville, Bowie, College Park, Burtonsville, Silver Spring, Calverton, Baltimore, to name a few, and surrounding areas in the District of Columbia, and Virginia, we would be more than happy to provide you with a free consultation and assessment of your current bookkeeping and accounting Software. Be proactive, make sure that your records are being properly recorded!
DONT GET CAUGHT IN A TIME CRUNCH. MAINTAINING TIMELY BOOKKEEPING AND ACCOUNTING, WILL SAVE YOU MONEY!
Hopefully this blog provided valuable insight on what to expect if you plan to start your own business. For more information and insight email us at [email protected] or contact us at (301) 974-4568.