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Understanding Double Entry Bookkeeping

double entry bookkeepingDouble entry bookkeeping involves keeping a system of checks and balances within a business. The name double entry bookkeeping originates from the idea of entering all transactions twice so that you can minimize errors within business financial record keeping. In most regular forms of accounting records are kept just one time but double entry bookkeeping insurers a minimization of errors within business and accountability with receipts.

Double entry bookkeeping also includes all purchases that are made with cash, credit or otherwise. The simplest form of bookkeeping comes when a cash entry is made for your business. As soon as cash flows into your business it is recorded as both a profit as well as a new asset for your company this is partially how a bookkeeping expert will record transactions at least two times in double entry bookkeeping.

Professional Double Entry Bookkeeping

A credit transaction will be recorded differently in terms of bookkeeping because the value of the profits that you are receiving in your business will simply be added into your accounts payable and not directly into your debit assets. This means that you cannot currently access the funds that are available in your accounts payable until the balance is been transferred into your businesses name from the credit agency. Keeping track of these small book entries is very important for businesses so that they know exactly how much cash is tied up in creditors and accounts payable services. Understanding the total amount of money that a business will eventually receive is very important to maintaining a good cash flow. Quite often when credit is trusted for all transactions it can mean that a business will run into cash flow issues especially in the beginning stages. With double entry bookkeeping you can present this type of information with extreme accuracy so that you can better understand your company’s greater financial picture.

Ultimately, this type of bookkeeping is best done by a trained professional. In order to ensure accuracy and to maintain ongoing bookkeeping, professionals can work with businesses to provide these services. Ongoing bookkeeping can eat up quite a bit of a business owners time and understanding various forms of software and implementing financial recording is all best left in the hands of the seasoned professional.

For more information about double entry bookkeeping contact us here.

Double Entry Bookkeeping

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