Book-keeping is a process of recording & organizing all the business transactions that have occurred in the course of business. It is an integral part of accounting and largely focuses on recording day-to-day financial transactions of the business.
One of the main components of book-keeping is managing a general ledger. This is the primary document where book-keepers keep all their records, expenses and receipts. Recording on the ledger is known as posting. So, the more times there is a sale or spend, the more often the ledger will be posted.
Accounting gives you the data your business needs to make better decisions. Not only does it cover this, but accounting also reviews financial reporting & performance, and then reports back to the relevant people with this information. Business owners, shareholders, investors and many others depend on these financial reports for updates on its performance and overall success.
Accounting vs. Book-Keeping:
A lot of people think the two roles are the same, but both are different in scope.
Book-Keeping is a subset of accounting whereas accounting covers a much broader scope than book-keeping. The whole topic can be classed as accounting, whereas book-keeping is just a part of the system that uses aspects of accounting within its practices.
Although the two are different concepts, they dovetail really well and can contribute to the great success and organization of a business if carried out properly. So, if your accounting is going to be strong as it can be, your book-keeping needs to be too.
A strong relationship between the two is necessary and can help your business really take things to the next level, especially with your organization and communication.
Why Book-keeping is required:
£ Helps you budget accurately,
£ Keeps you prepared for tax,
£ Maintains organized records,
£ Easier to see business targets,
£ Meeting Government regulations,
£ Gives you extra peace of mind,
£ You learn in the process.
Maintenance of books of accounts:
According to Section 44AA and Rule 6F of the Income Tax Act, there is a list of professions who need to maintain books of accounts for income tax purpose:
£ If their gross receipts are more than ₹2,50,000 in 3 preceding years for an existing profession
£ If gross receipts are expected to be more than ₹2,50,000 in case of a newly set up profession
The list of professions includes:
F Technical consultants
F Interior decorators
F Authorized representatives, such as agents and contract negotiators
F Filmmakers, a category that includes producers; editors; actors; directors; music, dance, and art directors; camera crews; singers; song and story writers; script and dialogue writers; and costume designers
These rules shall also apply to a freelancer pursuing any of these listed professions if his gross receipts are more than ₹ 2,50,000 a year.