Accounting and bookkeeping are the backbones in maintaining smooth business operations. As the world continues to shift in digital platforms, online accounting and bookkeeping services could make things easier for many businesses. However, these two terms can be confusing as some people use them interchangeably as they are related to financial reporting.
Confusion between these two terms may cause the mismanagement of finance and accounts in a business. While bookkeeping and accounting are interrelated business functions, it is also essential to know that they have distinctions.
The function of bookkeeping involves recording all source documents for business operations and transactions like purchases, sales, receipts, and payments. Meanwhile, accounting functions to interpret, analyze, report, and summarize the financial data in bookkeeping.
Through a business’s various financial records like audit books, financial statements, and sales reports reflecting their financial position, their growth and progress can be tracked and monitored.
Financial records provided by bookkeeping and accounting can also help a business in budgeting and planning, which are essential aspects of management. Budgeting and planning allow businesses to anticipate the resources needed to achieve their goals and objectives. It also ensures the availability of several business documents like income and expenditure statements and balance sheets to prepare reports that can guide business management.
Bookkeeping and accounting also keep track of expenses and sources of income as the business continues to operate. It records the profit and the money they spend for the profit to keep coming.
Bookkeeping and accounting also provide information that could guide businesses in making informed, precise and efficient decisions that could help their progress in the long run. It has its advantages, especially for small businesses. That is why it would help enlist the best free online accounting software for a small business for smoother business operations.
You can take a look at this infographic by KIPPIN for more information on the uses of record-keeping and accounting.