Are You Doing Your Business Accounting Right?

One of the most important parts of running a business is ensuring that the financial matters are accurate and updated. If not, this can lead to the downfall of your business that you’ve worked hard to build.

This puts a bit of a pressure to the people assigned in the accounting department. Especially when accounting businesses company in Singapore are expanding. A simple mistake can cause confusion within the business. So, this leads us to the question: How do I know if I am making my business accounting right?

First of all, you need to know that there is what we call an Accounting Cycle. If you are the bookkeeper of your business or someone else is, you need to be aware that you complete your work be completing the Accounting Cycle. It is a cycle as the process is circular: you enter a transaction, guide it through the cycle, ending it, and starting another cycle with the next account. In detail, there are eight basic steps.

1. Transactions. This can include the sale or return of a product, purchase of supplies, or pretty much anything that involves the company’s finance.
2. Journal Entries. The transaction is then recorded in the corresponding journal. It is important to note that chronological order of entries must be observed.
3. Posting. When it is recorded, it is then posted to whichever account it impacts.
4. Trial Balance. This is a calculation at the end of the accounting period which can be a month, a quarter, or a year depending on how the business wants it.
5. Worksheet. Most of the time, your calculation of the trial balance yields erratic results. You then look for these errors and make adjustments. These adjustments are tracked on a worksheet. After all these adjustments, you compute another trial balance.
6. Adjusting Journal Entries. After the trial balance is confirmed to be correct, you post any corrections and adjust the journal entries.
7. Financial Statements. This is the period where you prepare the balance sheet and income statement with the verified correct account balances.
8. Closing the Books. You end the cycle by closing the books and begin another cycle with zero balances on another account.

Why is it important to be able to follow this cycle? Regardless the size of your business, it is stressing to find missing necessary information on your accounts. With accounting, you can understand your business well. You will be able to come up with strategies concerning other departments of your business if you know the current financial status of your business.
Accounting can be complicated. But, if you know how to do it on a regular basis and with the right skilful people, it shouldn’t be overwhelming. Give the accounting sector enough attention so you don’t become engulfed with its repercussions.

RJ Globe Management is the leading accounting services provider in Singapore with a wide range of comprehensive services ranging from incorporation, bookkeeping, taxation, formation of trust and other corporate advisory.