Bookkeeping For Accounts and Taxation Purposes By Vish K S
For every small time business owner, the bookkeeping part is undoubtedly a heavy burden. But it is important that he establishes an efficient bookkeeping system from the start itself while conducting business. Managing a business which complies with the laws and business requirements warrants the setup and maintenance of some organised system of accounting. For an accounting procedure to succeed, it is fundamental that some mode of financial accounting like the receivables and goings be established, and that all these records present a true bookkeeping picture for analysis as well as for tax purposes.
Bookkeeping is an indispensable part of a business; one can state a number of reasons like: audit purposes, preparation of bookkeeping documents, as a basis for strategic decision making purposes and preparation of investor prospectus and other documents. All said and done, there are still a lot of small scale business owners that do not keep appropriate tabs on their business’ financial part. This can lead to larger headaches when the tax personnel comes knocking, eventually.
In order for someone to maintain sufficient bookkeeping records, one should adopt a policy of keeping the receipts as well as cheque stubs as evidences of income coming in and going out. These documents have to be compiled daily, entered onto a fundamental spreadsheet and have to be filed for later references accordingly. This is bound to enable one to prepare a fundamental cash flow account. It will show the monies coming in and the monies going out on a day to day basis. Keeping a tight tab on this can be of great assistance in dealing with the administrative part of running a business.
One has to make a monthly profit and loss account, and has to take into consideration the cash flow statements one has prepared and any other financial information snippets relevant to the business. Work out the gross profit; to begin with, by subtracting direct costs of sales of goods from the total sales figures. After that, one may continue to find the net profit figure by taking away all other expenses related to the business, including heating & lighting, salary and interest repayments. This will provide you with the net profit and will allow you to find out how much money you have made over the said period.
Finally, one should also embark on preparing the balance sheet as part of the accounting system. This system will keep an eye on all the assets and liabilities of one’s business process. In other words, only short term liabilities are taken into account in the deduction from total assets. The long term liabilities are put in as if they were regarded as assets. Keeping accurate bookkeeping records while conducting business is very vital for marketing and operation purposes, principally when one needs to submit statutory accounts and tax related documents. It is good for the business and one ought to make sure that one is up to date with the record keeping part and accounting documentation aspects so as to prevent problems like tax evasion and fraud.
