is a detailed record of the financial transactions of the business.
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MaRS Startup Toolkit
Bookkeeping basics for startups: Manage your financial records
Bookkeeping is the recording of all financial transactions, including financial records of purchases, sales, receipts and payments, as well as accruals for payables or receivables. The goal of bookkeeping is to record all of the company’s financial transactions in a detailed way that provides useful information without being overwhelming.
Bookkeeping also involves storing and retrieving the records of the company’s financial transactions. It requires knowledge of debits and credits and a basic understanding of the financial statements. Bookkeeping can be done manually using spreadsheets, but, increasingly, bookkeeping software is used.
In bookkeeping, it is important to consider who will be using the records. Senior managers will have significantly different needs for analyzing the company’s performance, compared to the accountant who prepares and files the financial statements or various tax returns and government remittances. Also, if an auditor is to use the records, they may need to be able to track the details of transactions in their testing.
Bookkeeping basics for startups: Four key steps
For small businesses, there are four main steps in the bookkeeping process:
Gather the source documents, including cheque records, deposit records, bank statements, bills from vendors, receipts for purchases and invoices issued to customers
Enter the information from the source documents into journals and accounts
Perform end-of-period procedures: balance accounts and perform reconciliations
Close the books for that period