What is bookkeeping? Types of accounting
Bookkeeping or bookkeeping is the process of maintaining the income and expenses of a business. Accounting was created thousands of years ago and the concept of double entry and debits and credits accounting was organized in 1494 by Luca Pacioli.
Accounting is like a big machine where we put raw financial information into the records of all of our business transactions, taxes, projections, etc., which then spits out an easy-to-understand story about our company’s financial condition. Accounting tells us whether or not we are making a profit, what our cash flow is, what the present value of our business assets and liabilities is, and what parts of our business are actually making money.
Bookkeeping account is a process of extracting and recording financial transactions. When data is provided in reports for use by individuals or businesses outside the organization, the process is called âfinancial accountingâ.
Importance of accounting
The process of financial accounting is important because it deals directly with a company’s money, especially all expenses and income related to its day-to-day business operations and investments. This information may be recorded incorrectly, not at all, or incorrectly cataloged.
Every transaction must be recorded and accounted for accurately in order for a company’s financial statements to be accurate. Inaccurate reporting can cause serious problems for a business, implying that it may not be able to pay its debts, or that the money set aside for investing is not available.
Accounting vs bookkeeping
Accounting and bookkeeping overlap in many ways. Some say that bookkeeping is one aspect of bookkeeping. But if we want to separate them, we could say that accounting is the way we record and categorize our financial transactions, while accounting puts that financial data to easy use through tax analysis, strategy and planning.
Types of accounting
There are several types of accounting ranging from auditing to preparing tax returns. Accountants need expertise in any of these areas, which leads to the different career paths mentioned below:
- Financial Accounting
- Public accounting
- Government accounting
- Forensic accounting
- Management accounting
- Tax accounting
- Internal Audit
How to get the best accounting services
There are many accounting and consulting firms (such as MJH Accounting) who provide professional accounting services. We have to be very careful when choosing the accounting and consulting company so that we can get the best accounting services for your business.
Consider the things when choosing an accounting and consulting firm that are mentioned below:
- Certification and experience
- Quality assurance
The accounting cycle
Accounting begins the moment we enter a business transaction any activity or event involving our business money in our business ledger. Recording of business transactions is a means that is part of accounting. Accounting is the initial level of what accountants call the âaccounting cycleâ. A process for gathering raw financial information and creating accurate and regular financial reports.
The accounting cycle has six major stages:
- Record and analyze transactions (invoice management, bank statements, etc.)
- Record transactions in the general ledger (according to the principle of double-entry accounting)
- Serve an unadjusted trial balance (this includes listing all of our business accounts and determining their balances)
- Prepare to adjust the entries at the end of the period
- Prepare an adjusted trial balance
- Prepare financial statements
Accounting is the process of classifying, measuring, processing, analyzing, recording, and reporting a company’s financial information.