For a start, it is important to note that bookkeeping is not the same as accounting. Bookkeeping is the first step to doing proper accounting.
The main concept of bookkeeping is the tracking of a general ledger. A bookkeeper will record monies that come in and out of a company in a ledger. A ledger is just a record of all transactions that happen over a period of time. If you see someone with an excel sheet with a record that shows entries like date, description, and amount of entry then that in essence is a simple ledger.
In a nutshell, bookkeeping is the process of recording, organising and most importantly, classifying all financial transactions that happen. It is usually sorted into financial periods which in most cases are the start to the end of the various financial years. Items that are typically recorded are things like:
- Monies received by customers
- Monies paid to vendors
- Cash deposits
- Transfer of monies to and from the bank account
- Rent paid
- Rent received
- Salaries paid
- Taxes paid
If you have been through some introductory modules, you may have heard of terms like t-balance, credit, and debit. Bookkeeping is somewhat like that.
The information usually needed are things like
- Date and time of the transaction
- Income or Expenses
- Customer or Vendor’s name
- Transaction amount
- Transaction type for categorization
Categorizing your transactions is important as it will allow you to make better business decisions. The company should know which of their product is doing better and which is doing not too well. Imagine having two categories of products, shoes, and socks. Shoes may be doing well but socks may not. So the company may decide to stop selling socks and focus on selling shoes instead.
It is important to maintain the company’s books properly. If you have anything which you would like us to cover with regards to bookkeeping, you can email us at [email protected].
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Singapore Secretary Services
For more useful articles and videos, visit the Singapore Secretary Services resource page.