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Bookkeeping is the important task of keeping records of financial transactions and it is the essential part of accounting in all the business operations. It is such an important activity that decides your business strength. It is the activity of Classifying, Reporting and Analyzing data. Without proper bookkeeping, it’s impossible to run your business and you may wind up with unexpected challenges and outcomes.
How Bookkeeping helps you in managing and growing a business?
In summary, in layman terms, we have the following process to follow.
1. Organise the data into different accounting categories like expense, income etc
2. Ensure that Numbers are balanced.
3. Generate reports based on the above numbers as per the statutory needs
At the end of the day, its just preparing the numbers in a way, it make sense to all.
In details with accounting terms, we do the following activities.
1. Bookkeeping works on duel impact premise which debits and credits. The two equal and reciprocal effects of recording of the each transaction and entitle of debits and credits.
2. Debits represent an asset and Credits represent a liability. Debit will increase the value of assets and credit will reduce its value.
Initially bookkeeping it may confuse little bit, but the fact is very simple, once you understand the strategy of financial transaction, Debits, Credits and Equity.