What is bookkeeping?

Saturday, February 8th, 2020

And is there is a difference between bookkeeping and accounting?

The process of bookkeeping is essential for any business.  As an owner you will be able to identify if your business is generating profits or losses.

What will a bookkeeper do?

The action of bookkeeping is the recording and retrieving of financial transactions for a business.  It can include these most common financial transactions:

  • Paying suppliers
  • Raising sales invoices
  • Recording the receipts from your customers
  • Processing payroll
  • Running financial reports
  • Recording journals
  • And much, much more

What is the difference between an accountant and a bookkeeper?

Both are necessary for any business, but they are very different to each other and a bookkeeper cannot advise on the same things as an accountant can.

Bookkeeping is simply the recording of financial transactions, where accounting is the interpretation of those transactions, classifying, analysing, reports and summarising the financial data.

Bookkeeping Systems

Single-entry bookkeeping

This is normally used for companies that have few transactions and records the business expenses and cash sales that are paid when incurred.  It typically consists of a cash sales journal, a cash disbursement journal and bank statements.

Double-entry bookkeeping

This method is used for companies that have more complex transactions.  The system posts single transactions as an income or expense item and a second entry is created to trace the transactions to a corresponding account.  This usually happens when you pay for expenses after you have purchased them; and when you give customers credit and they pay you later.

Should I use software?

Many small businesses have opted to use software for ease, but if you are a small company with simple transactions there is no requirement to do so.  A good bookkeeper will use software to record your transactions for you.  Seamount Accountancy uses Xero for all their clients, and you can have access to be able to produce your own reports.  The benefits of using software are:

  • You can process accounts quicker
  • Increased reporting accuracy
  • Provide accounting reports as necessary
  • Streamlines business tax filing
  • Your data is backed up, so you won’t lose it

Will using a bookkeeper save me tax?

Quite simply, no it won’t – as they only record the transactions. It is an accountant that will save you tax as they analyse those transactions and apply certain accounting principles.  However, the more organised your records are, the easier it is for your accountant to file your tax returns.

What if my data isn’t up to date?

An accountant can only use the information you have provided to complete your tax returns.  That’s why at Seamount Accountancy we offer the whole process of bookkeeping, accountancy and taxation as one service.  That way your records are complete and up to date, ready for the tax to be calculated.

Do I have to have a different bookkeeper to my accountant?

No, you don’t most accountancy practices offer both services either on their own or as a combined service.

What can I expect my bookkeeper to record?

They will typically record:

  • Cash
  • Accounts receivable
  • Stock
  • Accounts payable
  • Loans payable
  • Payroll expenses
  • Owners’ equity
  • Retained earnings

If you would like further information on how Seamount Accountancy can help you keep your records, please contact us HERE.

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