Should You Set Up Double-Entry Accounting for Your Business
Are you setting up your bookkeeping, and you’re wondering if double-entry accounting is right for you? What you choose as the system for your accounting is crucial; therefore, you need to know what double-entry is, and how it can benefit your business.
What Is Double-Entry Bookkeeping
Double-entry bookkeeping helps minimise errors and increases the chance that your books are properly balanced. It works by entering all your transactions twice. It tracks where the money comes from and where it’s going.
The Debit and Credit
Every financial transaction has two entries—the debit and the credit. Each entry affects two different accounts.
When making these entries, the debit is on the left, while the credit is on the right. These entries get summarised in a trial balance that shows the balances and totals of your total credit and total debit. You can determine that you did it right when the trial balance shows both credit and debit balances are the same.
How Is It Different from Single-Entry?
Single-entry accounting is focused on writing down all business’s transactions in a single ledger. It’s a quick and easy process, but it doesn’t track assets or liabilities. You can barely tell the health of your finances with single-entry accounting.
On the other hand, double-entry accounting provides enough information to create all significant financial statements that are necessary for every type of business today. Consider double-entry accounting a more detailed approach into your finances.
Should You Use Double-Entry?
If you have a small business, and you only deal with one employee with few accounts to keep track of, then a single-entry accounting will suffice. However, if you have a more complex business, then it is recommended that you adopt double-entry bookkeeping. It provides a more unobstructed view of your finances compared to single-entry.
Since you can track where your money is coming from and where it’s going, you can gather all the information and turn them into financial statements that will be helpful for your business when dealing with partners, lenders, investors, and even clients. It will also allow you to see the profitability and health of various aspects of your business easily. That said, you will be able to make better decisions with double-entry accounting.
Moreover, double-entry reduces the risk of errors and increases the transparency of your finances. Mistakes can be costly for every business, which is why it’s crucial that you take the necessary steps to make your processes error-free. Double-entry bookkeeping can also help you be taken even more seriously by other people in your industry.
Use a Double-Entry Accounting Software
Make double-entry so much easier by using accounting software. It will help automate the process and keep you on track of all the details. There is plenty of software you can get today, which is why it’s essential to explore your options.
Double-entry accounting is essential to more complex businesses that deal with more employees, debts, bigger inventory, etc. This type of method will provide you with more significant insights into your financial activities, profitability, and help you make better financial decisions that will help take your business to the next level. Consider double-entry accounting software and the help of a business accountant in Gold Coast to help you out.
New Wave is one of the best business accountants in Gold Coast. We can help you with your double-entry bookkeeping. Contact us today!