It is easy to confuse bookkeeping with accounting but they actually serve two different functions which are both essential for any business
Many small businesses have an accountant who takes care of the annual tax returns. They might also tell you if your business is in profit or not. But did you know that bookkeeping also forms a vital part of your business accounting?
An accountant takes care of the big tax calculations at the end of the year. However if you don’t have a bookkeeper in place then it us up to you to track every single business transaction. Everything from invoicing a client for thousands of pounds, to buying paperclips from the petty cash tin.
Bookkeeping is the first stage of accounting
Bookkeeping and accounting have many areas that overlap. You can think of accounting as being the ‘big calculations’ which are often made at the end of a tax year. Bookkeeping involves keeping track of the day-to-day business financial records. This includes all invoices, receipts, credit notes, purchase and more.
Bookkeeping is the first part of the accounting process. A business needs to have accurate records of all business transactions. Otherwise the entire accounting process is based on guess work! Nowadays most bookkeeping is done using software, but originally numbers were literally kept in books – hence the name book keeping.
A bookkeeper keeps an accurate and complete record of your financial transactions
A financial transaction is any exchange of money, services or assets between two parties. In the business world this can be small everyday expenses such as buying office supplies. You might pay rent for your premises, or have to pay transport costs. Any sales you make, whether it’s selling a product or service, or invoicing a client for your time, all have to be recorded. At the other end of the scale are large purchases like company cars or materials for a job.
Not only are accurate records essential for planning and controlling your finances. Also you are required by law to keep several years worth of financial records in case HMRC decide to investigate your tax affairs.
Accountants analyse and interpret the information provided by a bookkeeper
Your accountant will focus on the bigger financial picture. Now that you have accurate financial records your accountant can advise you effectively. They might suggest the best way to structure your business for tax purposes for example. By analysing your financial data your accountant can summarise your business performance and provide reports on the health of your company.
Our bookkeeping services make your life easier
Roden Associates are here to make your life easier. We provide all the support you need to make sure your business bookkeeping is accurate and complete. We can set you up with accounting software such as Xero that allow you to simply scan receipts and invoices and we’ll do the rest.
Our team of book keepers and accountants are based in central Edinburgh and we cover Central Scotland, including Glasgow, Falkirk, Linlithgow, Livingston, Fife, Dunfermline, Kirkcaldy, Stirling and Perth.