![]() But a few months later when the memory of the transaction fades, you may ask where the money came from, whether you borrowed it, or sold something for cash. That would be called single-entry bookkeeping, which only records cash transactions. One way to record this transaction is by saying you received $1000. ![]() Before we get into the technicalities, let’s look at an example. To put it more accurately, each transaction has a corresponding and equal reaction. It is so called because in this system each business transaction is entered twice in the financial records. What is double-entry accounting?ĭouble-entry accounting is a bookkeeping method. Pascal Ambrosino, a CPA and CFO at a private equity firm that invests in SMBs, says, “Without double-entry bookkeeping, you cannot have the information you need to make actionable business decisions.” Leveraging Pascal’s experience and insights, this article will help you understand why double-entry bookkeeping is important and when to best use this system for your business. Double-entry accounting gives a clear view of the profit or loss of your company, simplifies doing your taxes, and records information needed to impress investors and lenders. Whether you are planning to serve as your own bookkeeper or hire someone on payroll or get an accountant on a self-employed basis, it’s important that you follow the double-entry accounting method to enter daily business transactions into your financial records. This means that a significant majority of these business owners must manage their own financial records, which can be incredibly challenging without the right knowledge and tools.
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