What is bookkeeping? Definition and role

What is bookkeeping? A commonly used term, accounting remains a cornerstone in the life of a business. But, if we often hear about it, we sometimes come to wonder what is its real definition of Bookkeeping Services in Melbourne, or even what is the role of accounting?

Faced with multiple fiscal and legal constraints, you can legitimately ask yourself the question.

In this article, we come back to the definition and role of Bookkeeping Services in Melbourne to better understand it and understand all its contours. Because, at the heart of accounting issues , it is indeed a question of the good management of your business.

Definition of accounting

Broadly speaking, accounting is a discipline that allows you to establish accounts and report, continuously and in real-time, the financial situation of your business.

It aims in particular to identify all movements of money and financial flows entering and leaving the company, such as income and expenditure, for example. For this, all financial transactions are recorded in an accounting book, called a general ledger.

Also note: accounting is based on several major accounting principles such as the principle of going concern, the principle of independence of financial years, or the principle of prudence.

The role of accounting in a business

A financial information tool

Concretely, accounting focuses on:

• prepare the company’s accounts,
• collect and coordinate all financial data .

The role of the accountant in the company is to enter Bookkeeping Services in Melbourne information and ensure its reliability and veracity.

Good bookkeeping should indeed allow the reconciliation of financial information with financial transactions, that is to say with transactions that have been carried out (sales, purchases, investments, etc.). For an accounting entry to be true, a link must be established using a supporting document.

• Accounting entries: a key concept of accounting to master

In practice, the Accountant will be responsible for entering the accounting entries related to the activities of the company, throughout the accounting year, which is the period defined for recording all the financial flows that concern it.

A decision-making aid

Accounting remains an indispensable tool for the management of the business and decision-making. The role of accounting is to provide management and business leaders with reliable information to define a strategy and make decisions in light of the economic situation.

Thus, when closing its financial year once a year, it draws up summary accounting documents, which are mandatory. It can also produce provisional statements ( interim accounting statements) at any time, showing the company’s financial situation on an ad hoc basis.

Useful for management control, it goes even further than the role of aid in decision-making. For example, calculating the profitability of a position allows you to assess the relevance and viability of your company’s business model.

The importance of Bookkeeping Services in Melbourne

Day-to-day Bookkeeping is of paramount importance. It allows both to:

• give a global and reliable image of the economic situation of a company. This image will then be communicated to shareholders and external stakeholders through the production of mandatory summary documents (general accounts);
• calculate the costs to deduce the profitability of each business segment and identify the profit and loss positions of the company (cost accounting);
• prepare future budgets in a forward-looking process, by comparing the actual achieved with the initially projected figures, in order to readjust future forecasts (budget accounting);
• daily follow-up of all expenses and cash inflows concerning the company, as well as changes concerning its fixed assets.

Bookkeeping is a scary word. Still, it’s not that bad. In practice, this requires regularity and a little rigor. Necessary to meet the legal obligations of the company, it also makes it possible to situate its performance: a decisive tool from all points of view.