Contents
- Types of Bookkeeping
- Single-entry Bookkeeping
- Double-entry Bookkeeping
- Methods of Bookkeeping
- Manual Bookkeeping
- Computerised Bookkeeping
- Bookkeeping services
- In-house Bookkeeping
- Outsourced Bookkeeping with ScAilable
- What records must be kept?
- Legal requirements
Types of Bookkeeping
Single-entry Bookkeeping
Features
Single-entry bookkeeping typically tracks cash flow, rather than accruals. This means that transactions are only recorded when money is received or spent (does not record liabilities, depreciation etc)
No built in double-checks
As each transaction is only recorded once (either as income or expense), there’s no clear record of Debit and Credit to ensure the values are balanced. This means that errors in the recording process can easily go unnoticed
- Debit: Increasing your assets, Decreasing your liabilities
- Credit: Increasing your liabilities, Decreasing your assets
Who uses single-entry bookkeeping?
Small businesses typically have lower transaction volumes. This means they have more straightforward tracking needs, so single-entry bookkeeping should suffice.
Freelancers/ Sole proprietorships
Due to their limited financial activity, complex double-entry bookkeeping is not necessary and single-entry bookkeeping can serve to simplify their processes.
Pros
It does not require any complicated software or processes. Even a single spreadsheet can do the work
Cost-effective
Can be done by businesses who are on a tight-budget, and does not require hiring a professional accountant
Easily understood
In one glance, it gives you an understanding of how much cash you have at the moment
Cons
Since it does not track assets, liabilities or equity, you don’t get the complete picture of your business’s financial state
Regulatory non-compliance
The information available from single-entry bookkeeping is not comprehensive enough to prepare official documents such as financial statements.
Prone to errors
Without any double-checking mechanism, calculation and inputting errors are difficult to spot.
Double-entry Bookkeeping
Features
Every transaction is recorded in 2 accounts (debit and credit) to ensure it remains balanced
Built-in double checks
As each transaction is recorded twice (debit and credit) this serves as a built-in mechanism that ensures the accuracy of the financial record. Debit: Increasing your assets, Decreasing your liabilities Credit: Increasing your liabilities, Decreasing your assets
Who uses double-entry bookkeeping?
Businesses of all sizes can use double-entry bookkeeping. However, it is particularly useful for larger businesses as they have high transaction volumes and less straightforward tracking needs. With more numbers to work with, in order to minimise the room for error, double-entry bookkeeping is more suitable.
Pros
As every transaction is recorded in 2 accounts (debit and credit) to ensure it remains balanced, this serves as a built-in mechanism that ensures the accuracy of the financial record. Any errors or mistakes made can easily be spotted and corrected
Regulatory Compliance
The system of double-entry bookkeeping provides detailed insights on the financial health of your business. These reports are not only more comprehensive, but also comply with accounting standards such as GAAP and IFRS, which require double-entry bookkeeping to maintain financial transparency and accuracy. Complying by such standards would make your business more attractive to external stakeholders.
Cons
Time-consuming and requires expertise
Double-entry bookkeeping is admittedly more complex than single-entry bookkeeping. It requires more time to record, and a thorough understanding of the various accounting aspects. But with ScAilable, our experienced accountants can do this job for you. You get the best of both worlds — accurate bookkeeping records, and efficiency.
Methods of Bookkeeping
Manual Bookkeeping
Manual bookkeeping refers to a more traditional approach of bookkeeping done physically such as in journals and ledgers. It is a more hands-on approach and is typically used by smaller businesses using single-entry bookkeeping.
Computerised Bookkeeping
In the era of technological advancement, bookkeeping has been made much more convenient. This is especially a lifesaver for large-scale businesses using double-entry bookkeeping, which involves large sets of numbers and data. Digital tools such as QuickBooks, Xero, Sage and Wave automatically generate financial reports efficiently and quickly.
In-house Bookkeeping
Outsourced Bookkeeping
In-house Bookkeeping services
Outsourced Bookkeeping
What records must I keep?
A list of records to include (non-exhaustive):
Financial statements
- Profit and loss statement (P&L) – how much you’ve earned or lost
- Balance sheet – how much you owe and own
- Cash flow – how much cash moves in and out
Invoices and receipts
- Sales Invoices – document sales
- Purchase invoices – document purchases
- Payment receipts – confirmation that payment has been made received
Bank statements
- Monthly Bank Statements – Bank statement issued at the end of every month
Payroll Records
GST and Tax records
Inventory Records
- Inventory purchases
- Inventory sales
- Cost of Goods Sold (COGS)
Contracts and Agreements
- Client contracts – terms of service between a business and its client
- Employee contracts – agreements made between employee and company
- Loan agreements – if loans were taken, this would include details (repayment, interest rate etc)
Fixed Asset Records
- Asset Description
- Cost of Purchase
Legal Requirements
This list of requirements is non-exhaustive. Failure to comply would result in penalties.
Maintain proper books of accounts
- Accurate and complete records should be kept up-to-date – for at least 5 years from the end of the financial year to which it refers to
Accounting records
- Invoices
- Receipts and payment vouchers
- General ledger
- Accounts payable and receivable
- Bank statements
- Payroll records