![]() ![]() If at any point this equation is out of balance, it will mean the bookkeeping process has gone wrong at some time. This is known as the accounting equation, and it is at the heart of double-entry accounting. With double-entry bookkeeping, each debit must always have an equal corresponding credit to keep this equation in balance: Assets = Liabilities + Equity You must therefore adjust both the cash and mobile phone accounts in your double entry ledger: Account ![]() Under double-entry accounting, you would make two entries: you trade one asset (cash) for another asset (mobile phone). You have started a new takeaway business and want to buy a new phone for when you are out on deliveries. Some examples of how double-entry bookkeeping works are set out below: Example 1: Buying with cash Some business owners will deal with the entirety of their double-entry bookkeeping, however in most cases bookkeepers or accountants are involved to help set up and run suitable systems to deal with bookkeeping needs. It is the only way to ensure that financial information is complete and correct and will support all the ongoing reporting functions that business may have. Very simply, all businesses will need to use double-entry bookkeeping. Using double-entry bookkeeping to record transactions provides you and your accountant with a detailed, comprehensive view of your financial affairs. It also enables business owners to track their finances on a regular basis, helping them to understand how the business is performing and supporting key financial decisions. It can then provide the owners or their accountants with the information they need to deal with all the tax and financial submission requirements the business will have such as VAT returns, annual accounts, tax returns and cashflow statements. What is double-entry bookkeeping used for?ĭouble-entry bookkeeping (which is sometimes referred to as double-entry accounting) allows a business to record all its financial transactions in a structured way.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |