As one of Kildare's most established bookkeepers to small to medium-sized businesses, we often get questions on bookkeeping. We often field some of the fundamental questions, like, what is bookkeeping, to more nuanced enquiries, like what is the best bookkeeping software. When a company is in the market for an accountant, they're eager to get as much information as possible. With that in mind, we've compiled some of the most common questions below. Of course, this isn't a complete list. If you have more questions, we'll happily answer them over the phone.
What is bookkeeping?
Bookkeeping is the process of recording, classifying, and summarising financial transactions to provide information that is useful in making business decisions. It typically involves maintaining records of a company's financial transactions, including sales, purchases, payments, and receipts, using a system of accounts. This information is then used to prepare financial statements and reports, such as balance sheets and income statements, that provide a snapshot of a company's financial health. Bookkeeping is an essential aspect of financial management and is typically performed by trained professionals or accounting software.
What is double entry bookkeeping?
Double-entry bookkeeping is an accounting system in which every financial transaction is recorded in at least two different accounts. The basic principle behind double-entry bookkeeping is that every transaction has two equal and opposite effects on the financial statements. For example, when a company makes a sale, the cash account will increase, and the sales account will also increase.
Under double-entry bookkeeping, every transaction is recorded in at least one debit account and at least one credit account. The sum of all debit balances should always equal the sum of all credit balances. This ensures that the financial statements are always balanced and that errors can be easily identified and corrected.
Double-entry bookkeeping is considered a more accurate and reliable method of accounting than single-entry bookkeeping, as it provides a complete picture of a company's financial health and makes it easier to detect errors or discrepancies.
What is the best bookkeeping software for small businesses?
Many bookkeeping software options are available for small businesses, and the best choice for your business will depend on your specific needs and budget. However, it's essential to remember that software is only ever a tool and is no replacement for the advice of an accountant.
Some of the most popular software options include:
QuickBooks: QuickBooks is one of the most widely used bookkeeping software options for small businesses. It offers a wide range of features, including invoicing, expense tracking, and inventory management. It also integrates with other popular business tools, such as PayPal and Square.
Xero: Xero is another popular bookkeeping software that offers a range of features, including invoicing, expense tracking, and bank reconciliation. It also has a mobile app that allows you to manage your finances.
Wave: Wave is a free, cloud-based accounting software that offers to invoice, receipt scanning, and financial reporting features. It's an excellent option for small businesses with a tight budget.
Zoho Books: Zoho Books is a cloud-based accounting software that offers a range of features such as invoicing, expense tracking, and project management. It also integrates with other Zoho apps for CRM and inventory management.
KashFlow: KashFlow is a UK-based cloud-based accounting software that offers invoicing, expenses and purchases order management. It also provides VAT return filing and HMRC submission.
It is always a good idea to try out the software before committing to it; many software providers offer free trials. We can also make recommendations on what the right software option is for your business.
What is the difference between bookkeeping and accounting?
Bookkeeping and accounting are related but distinct disciplines.
Bookkeeping is the process of recording and systematically classifying financial transactions, typically using a system of accounts. This includes recording transactions such as sales, purchases, payments, and receipts in a company's financial records. The primary purpose of bookkeeping is to provide accurate and timely financial information that can be used to make business decisions.
On the other hand, accounting is the process of interpreting, classifying, analysing, reporting, and summarising financial information. This includes preparing financial statements and reports, such as balance sheets and income statements, which provide a snapshot of a company's financial health. Accounting also includes activities such as budgeting, forecasting, and cost management, as well as compliance with tax laws and regulations.
In summary, bookkeeping is focused on recording financial transactions and providing the raw data for accounting, while accounting is focused on analysing and interpreting that data to make informed business decisions and comply with regulations.
If you would like to discuss your bookkeeping needs with one of our accountants, please request a consultation today.