How is Bookkeeping and Accounting Different?

Working in the money part of a business is always confusing. Some people may call you the bookkeeper and others will say you’re in the accounting department. So what is the difference between the two?

First let’s take a look at accounting. This will help you to better understand what each is and what they do in a business. The accounting department is responsible for many things in a company. It tracks any and all financial transactions with a systematic record process. It performs reports and analyses all financial aspects of the company. The accounting department handles all incoming bills as well as outgoing,. There are some companies, usually smaller ones, which incorporate the bookkeeping method into their accounting.

Usually there is an accountant for the accounting department and they are responsible for overseeing the money for the business. They also take care of taxes for the company as well as any audits that may come up. They keep track of all assets for the company and all accounts receivable and payable.

Bookkeeping in a way is much like the word. All money transactions for a business are kept track of by a systematic method of record keeping. Bookkeeping, however, does not deal with analyzing the financial part of the company. It simply is a method of recording all of the financial transactions. The name bookkeeping came about as a result of all of the records being kept in a large book. The bookkeeper writes down all entries and then posts them to a ledger. This helps to track incoming and outgoing money for the company.

There may be some companies that still use the book method for their bookkeeping department but most companies use a software program meant strictly for bookkeeping. When money is tracked in this manner, you still need to keep up a cash book, a daybook and a ledger. When it comes to bookkeeping you will notice that there are two different kinds: single entry and double entry. Many companies like the double entry method as you have a way to double check your original entry. In single entry you are putting an entry in your book either under credit or debit and it is all under one account where a double entry you are putting the entry in twice, once on a main account but in the main account are pages for each individual account so that you may check your entries at any time to see that all adds up.

The way a company handles its finances mainly depend on how large or how small it is, both ways have their advantages and disadvantages. The larger the company is, you will find that they have an entire department devoted to accounting.

Finances and Financial Discipline

Generally speaking, everyone knows what to do to secure one’s financial future. However, some don’t take action. What you really have to do is quite simple. First, you have to earn money. Second, you have to spend less than you what you earned. And third, you have to save and invest.

One of the first things you ought to do is sit down one day and write what your expenses are and also what your income is. Then you have to figure out how much you can save and also whether you can cut down on some of your expenses.

Think about ways to increase your income. My drink machine brings me about $3,000 a year. We also have t-shirt and Proshop sales. Take some of the income from these sources and invest.

You have to get rid of all your debts. If you have four credit cards, pay them off one by one, starting with the one with the least balance. It won’t happen overnight, but with financial discipline, it can definitely be done. If need be, cut back on your spending as much as possible while trying to be rid of debt.

Don’t wait for the perfect time to arrive to begin your investments. Today is the perfect time.

You need to open an investment account. Find a company like Schwab or E*TRADE and find an accountant and get involved in your investment account, so as to ensure tax benefits.

The rules for investment are simple. Keep it simple. Pick something that may not give you a huge return, but also carries less risk. It’s a good idea to diversify your investment by investing in mutual funds (which consist of a variety of stocks-some of which will go up and some of which will go down) as well as bonds and treasuries. Don’t jump into investment too quickly. Go in slowly.

Try to automate your investments every month, so that you can be on track toward achieving your financial goals

Don’t be afraid to ask questions. Talk to people who know more than you about the financial world. Just walk into a bank and ask questions. “Well, if I gave you $500, what can you make it do for me in five years?”

Don’t be afraid to invest just a small amount. But make sure you do it all the time.

My advice to others is that if you don’t know where you want to be, you won’t get there. So analyze your goals. And then take the steps to get there. Make sure your goals are realistic.

Figure out an age for retirement or at least an age where you’d like to be prepared for retirement. This will make it easier for you to figure out how much you have to invest every month in order to reach that magic number. I use a website called http://www.mycalculators.com. This shows you how much you would have in the long-term along with your interest, if you invest a certain amount every month.

If you have kids, you have to figure out if you’d like to save money for their college education, and also if you would like them to inherit money after you pass away.

Corporate Finance and The Quality of Money

Economics as a broad discipline is sometimes treated as a hard and quantitative physical science and sometimes as a human and social qualitative science.

The ongoing debate revolves around whether economics follows certain mathematical laws which can be discovered, or whether it revolves more around generalities and tendencies which can be explored but never proved for certain.

Corporate finance, as a subset of economics, tends to be framed very much as a hard, mathematical science.

Whereas accountancy is a mathematical record of what has already occurred in relation to the trade and ownership of a company, corporate finance is the process of matching necessary funding to trade and the allocation of ownership through investment.

Stock and credit need to be funded, through various combinations of equity, debt and trade funding instruments. Companies’ ownership can change over time through the allocation of equity and investment aimed purely at ownership acquisition, or specifically for the funding of certain activities.

However, fresh thought is required about what value can be brought beyond the immediate cash value. This is particularly true in relation with regard to investments into growth companies, especially earlier stage ones. The new research theory of The Quality of Money is bringing attention to bear on how investment is considerably more than the exact monetary value alone.

The concept of The Quality of Money includes evaluative capacity, co-creation of a working relationship and a realistic plan, ongoing management support, ongoing sector leverage and additional networks, and the ability to construct an appropriate follow-on funding plan.

Some of the existing problem lies in the traditionally adversarial relationship between investor and investee. This has been exacerbated by the spate of TV business investment competitions and their host of regional and local imitators.

Good investment agreements are not built around brief and aggressive encounters, where the entrepreneur tends to rely on hyperbole and the potential investor often strays into overt bullying.

Another key ground on which investment discussions could frequently be much more productively established is that of a realistic plan going forwards. Entrepreneurs often feel a need to talk up potential – often to quite infeasible levels – and investors will quite often understate their perceived potential in order to contain owners’ valuation expectations.

Neither of these tactics will enhance the ultimate objective on which investor and investee interests are in fact completely aligned: the creation of fresh value in a business.

Far too few institutional investors have created rich evaluative methodologies. All too often a former banker will have a moderately good general understanding of general marketplaces. Really effective funders have built around themselves not only exceptional personal knowledge but also extensive networks of experts. These are quite frequently a combination of specialist academics who can comment on IP potential and two types of businesspeople: sector experts who can comment on the precise proposition and senior and successful entrepreneurs who assess and support management, marketing and motivation.

This leads on the final element in this overview of The Quality of Money – the ability to plan for funding success. If an investor does not have particularly deep pockets itself, this is particularly important.

If a business does achieve encouraging growth with its first serious injection of capital, the last thing it needs to be faced with when this tranche begins to run low is the distraction of seeking to find a whole new set of investment relationships and to begin again from scratch the huge task of promoting itself and securing investment.

Whilst it is very tempting for young businesses to take whatever investment they can find, it is wiser again to attempt to secure also the best Quality of Money. Also, for investors, it is imperative that they consider if they are risking selling their investment short through excessive aggression, lack of commitment to networks and support, and an inattention to possible future scenarios.