Importance of Bookkeeping for Small Businesses

Importance of Bookkeeping for Small Businesses

When you start a small business, you will almost hear the terms bookkeeping and accounting used interchangeably. There is a difference in bookkeeping and accounting in your business company. Small businesses may have bookkeeping and accounting functions, and they are synergistic.

Bookkeeping is the practice of recording your business transactions in your general ledger, book or program that contains all of your company's financial transactions since its inception.

Accounting is the practice of analyzing information in ledgers and developing insights about the financial decisions of your business. The bookkeeping process has become accessible to all and facilitates access to outsourced bookkeeping via the Internet—bookkeeping for startups. 

Bookkeeping

Bookkeeping is the process of keeping daily records of all financial transactions of a company. The accounting clerks record sales, expenses, cash, and bank transactions of the company in the general ledger.

One of the essential habits you must develop when starting a business is recording transactions in your general ledger. Ledger and accuracy are fundamental in your company's finances.

The recording of these transactions is referred to as posting. The accounts clerk may also create invoices and/or complete payroll. The complexity of the bookkeeping process depends on the size of your business and the number of transactions performed daily, weekly and monthly. You can also use QuickBooks bookkeeping services online.

The following nine accounts must be created and tracked by all but the smallest companies to provide adequate financial information to the company accountant for financial and tax statements:

• Cash: The cash ledger often consists of two parts which are cash receipts and cash payments, which are also used to complete the cash budget.
• Accounts Receivable: If your company allows accounts payable, it has accounts receivable. This information is used to create invoices and send invoices to credit customers.
• Inventory: If you sell products rather than services, you have a checklist that you must track.
• Accounts Payable: If you have purchased items like office supplies for your business and are using credit, you will have accounts payable. This account is also called trade credit, and it's what you owe to your suppliers. There is a cost associated with trade credit.
• Loans Payable: If you've borrowed money to make larger purchases, you should be able to track due dates and payments.
• Sales: You must be able to track your sales, whether it is credit or cash.
• Payroll Expenses: The cost of your employees' salaries.
• Purchases: This includes finished goods or raw materials. It is used in the cash budget and calculates the cost of goods sold to companies in the income statement.
• Owners withdraw: This is the amount the small business owner gets from the company.

The importance of business bookkeeping

Commercial bookkeeping help for small business, bookkeeping plays a beneficial role, whether for the merchant or those dealing with or for tax interest.

• For the merchant, the commercial books enable him to control his accounts and know his financial position at any moment. They allow him to see the status of his assets and liabilities, fixed assets and liquid assets. Commercial bookkeeping benefits the trader in enabling him to benefit from the preventive composition from bankruptcy and keeping commercial books. If they are regular - it is evidence of proof of the goodwill of the merchant, and good faith is a prerequisite for granting the merchant the preventive composition from bankruptcy. Also, bookkeeping The commercial book avoids the merchant's arbitrary assessment of the tax and zakat that the Department of Zakat and Income uses when the commercial books are not available or regular. Commercial bookkeeping benefits the trader as they are considered evidence of his interest.
• As for others, it helps, for example, the bankruptcy trustee in determining the rights and obligations of the trader in preparation for liquidating them, and it also plays a role as evidence against the interest of the trader.
• As for the tax, the commercial books help this authority estimate the tax owed on the trader based on its data.

The benefits and evidence of commercial bookkeeping for small business 

The commercial books that the merchant keeps are an essential way to monitor his interaction, and it brings him great benefits in his commercial life, as it has a unique and exceptional power of proof.

1. Benefits of commercial bookkeeping

The benefits of the commercial books appear for the merchant and those who do not deal with it.

• Concerning the merchant

Commercial bookkeeping brings multiple benefits to the merchant. It helps him constantly identify his financial situation by controlling all receipts and payments, which determines his financial position, profits, or losses when he wants an easy matter. He can always draw a plan to avoid mistakes. Avoid losses or bankruptcy.

On the other hand, we find that the books are an important way to prove the rights of the trader and his obligations towards others, as he can in some cases - and violation of general principles in the law. Use them as evidence for his interest in proving his debts on others. If the merchant stops paying his debts, he can with his books. It was regular for him to prove his goodwill, obtain the composition to prevent bankruptcy, and avoid being sentenced to the crime of default or fraudulent bankruptcy.

• Concerning others

The benefits of commercial books are not limited to the merchant who organizes them but also constitutes a guarantee for non-dealers who can - contrary to the general principles of civil law - prove their debts through the books of their opponent.

Regular books also benefit the state treasury when imposing an income tax. It facilitates the financial departments the process of verifying the tax fairly and proportionately with the profits earned by the merchant, thus avoiding the arbitrary assessment that may be unfair to him.

2. The evidentiary strength of the commercial books

The evidentiary power of commercial books varies according to whether we want to invoke them in the merchant's face or the trader's interest.

• In the face of the merchant

All commercial books are considered evidence against their owner, whether they are regular or irregular, and whether they are mandatory or optional for merchants and non-traders. The entries in these books are considered a written acknowledgment by the merchant. Even if the person who holds them is an employee working for The merchant, the third party can refute what is stated in the bookkeeping of his opponent, the trader, with the entries of his commercial books, or by any other method of proof if he is a merchant, or by civil evidence if he is not a trader. That third party - whether merchant or non-merchant - also has the right to adhere to the commercial books of his opponent, the trader, on the condition that the entries in them are not divided and that they are not excluded, which is inconsistent with his interest, according to the rule of "the impermissibility of splitting the declaration," meaning that this third party is entitled to either take the restrictions altogether or Turn it down entirely.

• In the interest of the trader

Here, a distinction must be made between the case where the parties to the conflict are merchants and where one of the parties is a merchant, and another is a non-trader. In the first case, if the two parties are merchants and the dispute is related to commercial matters. The plaintiff trader can prove his claim in his exclusively regular and mandatory commercial books. As for his optional or irregular books, their records are considered merely judicial evidence. Assessing their evidentiary power is up to the court per the rule of freedom of evidence in commercial issues.

In the second case, if the plaintiff is a merchant and the defendant is not a merchant, the rule says that the commercial books are not evidenced against anyone other than the trader. Nevertheless, the judge may apply the restrictions recorded in any of the merchant’s books as judicial evidence that needs evidence to support it. There is no doubt that with the introduction of computer technologies, floppy and hard disks have become used alongside books or as alternatives to them because of their ease and flexibility in dealing, and the new trade law before in more than one place with computer alternatives and granting them evidentiary power, such as Articles 16, 19 and 22, but according to the instructions issued by the Minister of Economy and Trade in this regard.