Measure your Money
Money is the fulcrum of any business operation. Like a ruler, it provides a scale to measure the business operations through the expenditure on operations, purchase of inputs for production, incentives to workers through wages, acquisition of assets & the income that pays for all these expenses with the difference that remains for the entrepreneur as profit. This gives the accurate dimensions & measure of a business operation.
Book Keeping provides the perfect tools for measuring the business. It allows for the documentation of inflows & outflows of money that are helpful for the business in accounting, controlling & planning purposes.
Forms of Book Keeping
Book keeping takes many forms. We intend to explore the simplest forms of book keeping applicable to small business records.
A Cash Book
This is the mandatory book keeping tool required by any business. It involves partitioning a book in two with one half allocated to incomes & the other to expenditures. Entries are made on a day to day basis to populate the cash book with data on the monetary activity of the business. The data is handed to an accountant to develop standard accounting documentation like income statements & balance sheets to better measure the business operation.
A Receipt Book
A receipt is a proof of payment for goods or services purchased from a business. This also plays a role of documenting all cash received by the business for goods & services sold. It provides reference for book keeping purposes and additional information like customer name, date of transaction & amounts received. This too is availed to the company accountant for review & documentation to create accounting statements. All information from the receipt should be transferred to the cash book.
Voucher
A voucher is issued for payments made by the business to outside parties like wages & purchases of inputs. Payments made by the company are properly documented & tracked with additional information like supplier & employee names. All information in the voucher should be transferred to the cash book.
A Journal
A journal provides the most convenient mode of data capture. It can take form in a diary or notebook that can easily be carried around. All financial activity is documented on a day to day basis like incomes & expenditures which are then transferred to the cash book & other relevant documents.
Outcomes
An effective book keeping culture provides the following outcomes;
- Compliance with tax authorities
- A measure for the business & its performance
- Better accounting, planning & controlling framework for the business.
- Improved understanding of the business & its operations
- A step into formal business structures & a step away from informal business practice
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