Bookkeeping can be defined as the system of keeping records and classifying all the financial transactions 

on a day-to-day basis concerning the business operations, in a sequential manner.

Types of Bookkeeping:

1- single-entry bookkeeping:

Single-entry bookkeeping is a simple and straightforward method of bookkeeping in which each 

transaction is recorded as a single-entry in a journal

2- double-entry bookkeeping

Double-entry bookkeeping is a method of recording transactions where for every business 

transaction, an entry is recorded in at least two accounts as a debit or credit. In a double-entry 

system, the amounts recorded as debits must be equal to the amounts recorded as credits.

Reasons why the double-entry bookkeeping is preferable :

1. The double-entry system is preferred by investors, banks and buyers because it gives them a more 

complete financial picture of an organization.

2. Error detection: In double entry, debits and credits must always be the same. It works on the basic 

accounting equation: Assets=Liabilities +Owner’s Equity

If that is not the case, then there is an error.

Reasons why bookkeeping is important:

1. Financial blueprint: A budget creates a financial road map for your business

2. Tax obligations: your business has to file a tax return every year. With a proper organization of 

records on your earnings, you won’t have to worry about scrambling for receipts and invoices

3. Reporting: You have to report your investors about crucial info like the financial status of the 

company, so it helps you to impress the investors as you can give a wood-perfect presentation 

regarding their investments.

4. Organization: As a business owner, you have to organize your business from tip to toe and 

keeping your financial records organized makes it easier to locate and provide to appropriate 

parties.

5. Business planning: Bookkeeping makes your business planning smoother and more manageable

6. Record keeping required by Law: bookkeeping allows you to keep your records properly as per 

the required laws.

7. Business analysis: In analyzing your financial statements, you can easily manage your profit and 

loss.

8. Decision making: With a good analysis, comes better decision making.

9. Financial management: Bookkeeping is crucial as it allows you to take control of your business 

finances.

10. Track profit and growth: helps you in preparing the income statement, which reflects your 

profitability.

11. Focus on strategy: Tactical and strategic planning is the core of what you do as a business 

owner and you can track the results of your plan with bookkeeping and adjust goals accordingly.

12. Better cash-flow: By observing the documentation, you can always increase the average 

amount of cash you have on hand at any given time.

13. Easier tax audit: with Tax audit, you wish to make sure your books are in order. Messy books 

prolong the auditing process and make your business more sensitive to fees and penalties

14. Assets = liabilities + equity: It means that everything the business owns (assets) is balanced in 

contrast to the claims against the company (liabilities and equity

15. Peace of mind: When your books are complete, you can rest easily, knowing that your 

company’s financial information is ready. Banks or HMRC no longer have to give you anxiety. 

Instead, you’ll find your mind at ease, and more focused on other elements of your business.

Steps to Manage Bookkeeping Efficiently are:

• Use cloud-based bookkeeping software.

• Separate business and personal finances.

• Perform regular financial checkups.

• Do a quarterly review.

• Keep records of business expenses.

• Keep a close eye on accounts receivable.

• Stay on top of tax deadlines.

• Automate whatever you can.

• Use technology to improve accuracy

Ways to reduce Risk in bookkeeping :

-Preventive actions (risk avoidance) here we take actions to deter or prevent undesirable events from

occurring examples of these actions: proper authorization, adequate documentation and physical control over 

assets

- Detective actions ( limitation ) here we attempt to uncover undesirable acts. Examples of detective 

controls are reviews, analyses, variance analyses, reconciliations, physical inventories and audits.

Risk of an activity with bookkeeping :

• your records become inaccurate and unreliable

• financing options become limited

• invoicing falls behind and cash flow suffers

• payroll problems start to rise

• managing expenses becomes tricky

• bookkeeping backlog drains your time and increases costs

• you may have problems with her majesty's revenue and customs.

BOOKKEEPING STANDARS:

Bookkeeping standards apply to the full breadth of an entity’s financial picture, including assets, 

liabilities, revenue, expenses, and shareholders' equity.

The most commonly used bookkeeping standard is the International Financial Reporting Standard 

(IFRS) which promises more accurate, timely and comprehensive financial statements that 

contribute to economic efficiency by helping investors to identify opportunities and risks across the 

world, thus improving capital allocation.

Belinda Panagiotou

Business Analyst