Accounting and Book-Keeping
Accounting is the systematic process of recording, analysing, and interpreting the financial transactions. It is the responsibility of every business – whether large or small to furnish their accounting records to the Income Tax Department. Generally, startups neglect these issues and, after a few years, they are forced to deal with them, plus interest. It’s always a good idea to keep track of your finances and provide information to government organisations to avoid difficulties like raids and fines. Companies are required to update the annual returns regularly.
Bookkeeping is the process of recording your company’s financial transactions into organised accounts on a daily basis.
Importance of Bookkeeping
- Proper bookkeeping delivers a reliable measure of a company’s performance
- It also serves as a guide for making general strategic decisions and a benchmark for the company’s revenue and profit targets
- In short, once a company is up and operating, it is necessary to devote more time and resources to preserving accurate records
- Due to the high cost of full-time accountants, many small businesses do not hire them
- Small businesses, on the other hand, are more likely to hire a bookkeeper or outsource the task to a professional agency
- One thing to keep in mind is that many people who want to start a new business forget the necessity of things like keeping track of every penny spent
- It also helps in detecting frauds or bank errors.
Benefits of Accounting & Business Compliances to a Business
- Budgeting: It assists organisations in efficiently controlling the company’s income and expenditure while monitoring managerial policies and goals.
- Evaluating the Business’s Performance: Helps in measuring the performance of the business in terms of key measures such as net profit, sales growth, and so on.
- Managing Cash Flow: Keeping track of the money that comes into the business on a regular basis helps in projecting patterns, paying employees and suppliers, repaying debts, etc.
- Financial Information to Investors and Stakeholders: Investors will gain a better understanding of the business’s financial health, including its solvency, creditworthiness, liquidity, stock, and bond issuers.
- Mandatory by law: In India, the Registrar of Companies requires a strict record of income tax payments at the end of the year, failing which companies may face additional taxes or fines.
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