Book-keeping
Book-keeping is a subset of accounting, its not really the job of accountants but in a small business the owner or accountant will do it. In larger business’s a book-keeper or accountant clerk will be hired to do the books. In some cases it’s also known as shoebox accounting because all the receipts get put into a shoebox until tax time 😆 Technically speaking, it is the process of keeping full, accurate, up-to-date business records including sales, purchases, income, receipts and payments by an individual or organisation.
If done correctly, book-keeping will effectively manage cash flow and help a business stay in control of profits and losses which also helps with future planning. It is a legal requirement by the ATO (Australian Tax Office), and one of the most boring parts of running a business.
Book-keeping is very beneficial but also very time consuming. Without exception, every amount that is paid or received must be recorded – regardless how small. At the end of the year, all the numbers must add-up! So accuracy is important on a daily basis.
The books are used by a Chartered account (or CPA depending on the degree of professionalism required) to prepare tax returns and determine how much tax must be paid, they are also used for audits and internal/external reviews. If the ATO decides to investigate the information reported on a tax return or other type of tax-related document then business owners are required to present accurate records for inspection/audit.
Although hiring book-keeping professionals is a nice solution, not all business owners can afford to do so. This is particularity true of smaller, home-based, or start-up businesses. At Champion Accountax we will recommend the best software based solution for your business to reduce costs and improve real-time cash-flow analysis.
There are two main types of book-keeping systems used by businesses and other organizations.
- the single-entry book-keeping system (uses only income and expense accounts, recorded primarily in a revenue and expense journal; this form is adequate for many small businesses)
- the double-entry book-keeping system (requires posting (recording) each transaction twice, using debits and credits)