Bookkeeping is the process of keeping a record of any financial transactions that are made by a business. The bookkeeping Perth are responsible for classifying, organizing, and recording all the financial transactions that happen while the business is running. Small businesses will usually have bookkeeping companies like Darcy Services Australia that will record all the transactions that are made in one year. This works in the same way that checkbook does. However, if there are more complex financial transactions, then the double-entry accounting process is used. Bookkeeping and accounting might seem like the same thing, but there are some differences between the two.
What is the main difference between accounting and bookkeeping?
Bookkeeping is very important to companies, but it is still an initial step as after bookkeeping comes to the actual accounting functions. A bookkeeper collects all the documents from the transactions, and once they do that, then they put it into debit or credit transactions. Every firm required reports after a time period. Some reports are at the end of the year, and others are quarterly, but all these reports need to be made for things like doing the taxes.
At the end of this period, an accountant will look over all the financial information and come up with a review and analysis for the firm. The accountant would make a financial statement for the year as well, and this report has to be the one that is established by the financial accounting standard board.
Whenever the books are being balanced, it is important to know about assets, liabilities, and even equities.
Assets are things like inventory and accounts receivable. Fixed assets are the land, equipment, factories, etc. There are tangible and intangible assets as well. Tangible assets can be touched, while intangible assets cannot be touched. These include goodwill etc.
Liabilities are whenever the company owes anything. For example, the company might owe mortgages, business loans, and other debts that can be on the books. There are current liabilities and long-term liabilities. Current liabilities are accounts that need to be cleared in the year, and long-term liabilities are those that have to be cleared in over a year.
Equity is an investment that is done by the business owner and the other investors in the business. So any claims that are against the firm also come under this.
There are main differences between bookkeeping and accounting, as mentioned here. In bookkeeping, an account is maintained to look at all the activities in good chronological order, while in accounting, you try and understand your financial strengths and look at the way you are operating your business. A bookkeeper does not require any additional skills or knowledge, and anyone can do it while accounting is more complex, and there are many things about it that the person needs to know and be aware of before they choose to make an account of things. All bookkeeping is done so that people can get a better understanding of accounting. Both of these are important, but accounting is the more complex one.