Bookkeeping is crucial for businesses to manage their business finances, but sometimes, it becomes overwhelming for those who are not aware of basic bookkeeping concepts. Fortunately, bookkeepers of Melbourne can help you manage your business books. In this blog, we’ll uncover basic concepts of bookkeeping that every business owner must know. By the end of this blog, you will have a solid understanding of bookkeeping. To save time and money, you can reach a professional bookkeeper to help you keep your business books in order.
What You Must Know About Bookkeeping?
Even if you have already outsourced your financial functions, as a business owner, it is vital to have a basic understanding of financial concepts to work with your bookkeeper. Take a look at the following section to learn a few things about bookkeeping:
• Balance Sheet
◦ Assets
It refers to things that you purchased and you own or you partially own. It includes things such as prepayments, cash, stock/inventory, or other money owed to the business as account receivables.
◦ Liabilities
It refers to the money that businesses owe to other parties, or how you paid for your assets. Your business’s liabilities may include loans, any amount of unpaid bills, wages, taxes, etc.
◦ Owner’s Equity
It is also called shareholder equity. It refers to the capital withdrawn and introduced by the business owner or shareholders. It is the balance of what you own, minus what you owe.
• Profit and Loss
◦ Income
It refers to the money that flows into the business, mostly from sales. Bookkeepers in Melbourne can help you keep track of the profits your business makes.
◦ Expenses
It deals with business expenses or the cash that goes out of the business.
• Financial Statements
There are several details you might mention in your financial statements. From cash flow to administrative overhead financial statements, however, the three primary financial statements that you will need are as follows:
◦ Balance Sheet
The balance sheet includes the assets, owner’s equity, and liabilities. The balance sheet of your business shows everything it owns. In addition to this, it also shows any amounts that your business owes. Bookkeepers for small business know how to prepare balance sheets for your business.
◦ Profit and Loss
Profit and loss include income and expenses incurred over a period of time. The result shows how your business is performing. Accurate financial statements can help you prepare and lodge the right tax return.
◦ Cash Flow Statement
Many business owners don’t understand the difference between cash flow statements and profit and loss statements. A cash flow statement helps you know how much cash flows in and out of your business.
• Bank Account Reconciliation
With bank reconciliation, you can cross-check your bookkeeping. Your bookkeeper can do it by matching your business accounts with your bank statements. If both records match, it means there is no error. On the other hand, if there is an error, then your bookkeeper can resolve those issues.
• Payroll
Any business with a number of employees must do payroll processing very carefully. Maintaining payroll compliance and understanding Single Touch Payroll is important for any business owner. This is where the bookkeeper can help you understand the whole process.
Working with a Professional Bookkeeper
It is important to ensure your business books are updated and in order. However, as a business owner, you may not have sufficient time to look after your business, that’s why it would be best to get bookkeeping services for your company. If you have basic knowledge regarding bookkeeping, then you can easily understand what your bookkeeper is telling you about your business books. If you want to focus on your business operations, then seek help from a professional bookkeeper to manage your business finances and keep track of your gains and losses.
Conclusion
Now that you know what common factors regarding bookkeeping you must know as a business owner. Irrespective of whether you are managing your business books on your own or you have an expert bookkeeper, it is beneficial to know about bookkeeping. You can reach us for Reliable Bookkeeping Services.