Bookkeeping is a systematic record of financial transactions in the appropriate books of records. What it means is, whether you make a sale or purchase something, a record will be maintained of the transaction. This record will allow you to easily keep a track of all your transactions and will help you analyse how you can cut costs and reduce taxes. Bookkeeping is a function of the accounts department of a business. However, many small businesses do not have fully staffed and efficient accounting departments and require the help of external bookkeeping services.
Why should you Maintain Books of Accounts?
It is a Statutory Requirement for all businesses except for Sole Proprietorship.
Helps you review your performance and take steps to improve.
Maintaining books of accounts helps you when you need funding from investors.
Five Reasons You Need an Accountant
Why do you need an accountant for your start-up?
As you may know, it is essential for businesses to maintain records of their financial transactions, no matter how small. The reason behind this is that the Registrar of Companies demand a strict record of income tax payments at the end of the year. Without maintaining your accounts, this is rather difficult to do, and you may, in fact, end up paying more tax than you should. Even apart from this, though, all businesses should be interested in their books of accounts, as it is crucial while planning expenses and keeping a tab on how the
business is shaping up.
What happens if you miss out a day or two of your accounting?
The answer would be simple: misplaced bills and confusing records. This may result in frustrations at the end of the year while you do your tax calculations or even while splitting up profits. Regular maintenance of records is essential, and only a person dedicated to it, like an accountant, can do the needful in this instance.
Why do you need an accountant?
If you’re not an accountant, it’s unlikely that you will be able to have your balance sheet tally at the end of the year. The reason behind this would be misclassification of expenses and assets and liabilities. One needs to ensure that all aspects of the business are correctly classified so that there is no confusion in future. This is the job of an experienced accountant, even though there is software today to do much of the work.
Is it essential to maintain records even though the company makes losses?
No, it is mandatory to maintain books even if you are incurring losses. Any financial transactions made for the business, such as purchase of goods, selling and so on, needs to be updated and submitted at the end of the year for filing income tax.
My tax liability for the year is very low, under the PTS. Do I still need to maintain the
account?
Yes, even if your Tax liability is lower than what you would pay under the PTS scheme, books are required as a proof to show at the end of the year. Book maintenance, can, thus, be not avoided under any circumstances.
Advantages of Bookkeeping
Cost-Effective
Time Effective
Higher Profits
Reduced Tax Liabilities
Peace of Mind