By: vish ks
Submitted: 2010-02-08 23:37:25 | Word Count: 539
All limited companies are required by law to generate a statement of assets and liabilities. In addition to that they have to maintain a system of financial control that invariably adopts a system of double entry bookkeeping with the help of some accounting software. And, outsourcing the bookkeeping task is found to be the perfect solution to everything. High speed access to all business accounts and accurate bookkeeping system at low costs ensure that you run your business firm without any hassles.
Every small scale business firm is required to keep bookkeeping records to be produced at the end of the respective financial year- a set of accounts that shows the sales, income, business expenses and the gross and net profit in addition to tax statements. Most of the medium and large scale businesses employ the services of accounts clerks and qualified bookkeepers to maintain their financial records in a good format and to produce regular and vital accounting information.
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Double entry bookkeeping is defined as the accounting technique used to record the financial transactions occurring in a business where each and every transaction is entered or indicated twice, resulting in equal and opposite transactions. Double entry is a must for all kinds of businesses that are required to produce a profit as well as a loss account apart from a balance sheet. The same rules may not apply to self employed persons and businesses that do not need to produce statements of profit and loss accounts and assets and liabilities statements. It is interesting to find that in the UK, a balance sheet happens to be an optional requirement for self employed business persons.
In the absence of a very good double entry bookkeeping system, a company doing business has less control over the different aspects of debits and credits related to the business. These being the amounts owed from customers who are usually called debtors and the money owed by small scale businesses to suppliers who have delivered the goods and services on credit; and they are termed creditors. Commercially available single entry bookkeeping soft wares are not just some accounting packages that generate profit and loss accounts, but are tools that carry additional facilities that aid in the financial management & control of a business. They do this by providing optional fields for cash, bank, debtors & creditor accounts that need to be maintained as stipulated by the authority.
Poor quality of financial management of small businesses is a major problem as this can drive a small business firm to fall into the liquidation and bankruptcy trap. Every business must have, at any given point in time, sufficient cash flow or availability of resources to engage in trade the next day. Good bank records and maintenance of a positive cash flow assumes importance; this is due to the fact that without liquidity no business firm can engage in commercial trading activities. The preparation of financial accounts using single entry bookkeeping takes into consideration the recording of prime financial transactions only once in contrast to the other system.
