Bookkeeping refers to the process of maintaining account books of business. There are some important aspects of business transactions that need to be recorded on a regular basis. These are later processed to estimate the profit/loss of the business and this information is used to pay taxes. Therefore, it is mandatory for every business to maintain books of accounts. This can be either done with help of software or by rendering service from a professional bookkeeper Adelaide service provider, read the full info here
Let us try to understand this with help of a simple example. When you start a new business of buying and selling of product A, then the first thing that you would do is to purchase a product A. Let us assume that you have purchased 100 units of product A. If you sold 60 units of product in the first month, then you would require to purchase another 40 units of it.
This process would continue in the coming months. You would gradually understand the potential of the business and you would know how many monthly units of a product you need to purchase. As it would not be possible to memorize purchase and sales records of every month, maintaining account books would make the job easy for you. This is a simple example of bookkeeping.
In the same way, there are other parts of bookkeeping like cash flow, balance sheet etc. that requires a regular update in record books. This is also helpful in analyzing the progress and development of a business. You can go through a different account book and get an idea about what is working for your business and also the areas in which it needs to improve. Apart from it, bookkeeping is also necessary to file the tax return and it is a must for every person or company who qualifies to pay tax.