Bookkeeping works on the dual effect principle. This principle presents the very basis for recording the transactions of a business into the records or books of the business. It states that every business transaction has a double effect or dual effect and for that reason, should be recorded in two places.
The two equal and corresponding effects of each transaction are called Debit and Credit.
Debit is an accounting entry that represents an asset while credit represents a liability. A debit will increase the value of an asset or expense account, or reduces a liability or equity account. A credit will either increase a liability or equity account, or reduce an asset or expense account.
So how does it work?
Bookkeeping is all about recording business transactions and finding practices that best suits your business’ needs. It forms the foundation of great accounting so you’ll know where your business stands financially. It can give you an accurate and detailed picture of your business’ finances so you can make informed decisions to reach your goals.
Standard bookkeeping examples
So what does standard bookkeeping include? Here are some examples of what a bookkeeper can do for you:
• Bank reconciliation
• Preparation of annual accounts
• Handling payroll, employ records and maintaining entitlements
• Record keeping
• Handling purchases, sales, payments, and receipts
• Preparing reports for preparation of BAS
• Building reports for both the accountant and management
• SMSF
• Families and family trusts
Bookkeeping case study
Bookkeeping can save you money and most of all, time. Take this case study of skydiver and rigging business owner Rick Boardman. He was doing the bookkeeping and his tax returns all by himself. He missed out on deductions that he was entitled to because he wasn’t a bookkeeping specialist. He also lost valuable time by trying to figure out the “complicated bits” in his books and tax returns.
Mr Boardman finally decided to hire a professional bookkeeper. Not only did his bookkeeper save his finances, he now has more time to skydive, and can work on other areas of the business such as fixing parachutes and packing reserves.
Doing your own bookkeeping can be a challenge and time-consuming, especially for beginners. In the early stages of business, it may be easy to take care of all the bills and financial receipts. However, as your business grows, everything will start to pile up. If you need a reliable bookkeeping service for your growing business, contact a Sphere bookkeeping specialist here today.
