There are many ways to make entries and keep records- after all, we are living in the age of digitization, but the four main ways of bookkeeping which are followed by accounting and bookkeeping companies in UAE are:
- Single-entry bookkeeping: The method is used by small businesses that keep inventory or stocks in less quantity and do not own physical assets. It involves making entries for every transaction in a cash book to track expenses and revenues. A company does not need to hire a professional accountant to give them the duty to track records. They can hire a high school student as well to make entries and track record. Usually, sole proprietorships and private companies use this method to keep records to make financial statements, payroll, and analysis. Besides, the records are used by the management team to analyze the growth rate so that better decisions and strategies would be made to accomplish the desired goals.
- Double-entry bookkeeping: Double-entry bookkeeping is used by large companies of private and government sectors that own physical assets and have a large amount of inventories. Double-entry bookkeeping is all about tracking records and finances of companies two times, first as debit and then as credit. Each transaction affects two accounts, at least. There would be increment in money in one account while decrement in another. Double-entry bookkeeper tracks the record of debited and credited accounts and makes sure that both have an equal amount in debit account because equal debit means that accounts are balanced. A double-entry bookkeeper can cater management team and board of directors more than single-entry bookkeepers by providing them detailed financial statements that could result in better cash flow policies and strategies.
- Cash-based bookkeeping: Cash-based bookkeeping is all about keeping a record of how much money has come into your account or exited from the account. There is a need to track record off all the cash the company has received by selling their services or products. It is the record of all expenses. Therefore, the cash-based bookkeeping is used in schools and small startups.
- Accrual-based bookkeeping: Accrual-based bookkeeping is all about keeping a record of earning. It can have a record of all expenses if they are earned. Usually, companies use both cash-based and accrual-based hand to hand to yield explanatory financial statements, road-map to follow budget and analysis that could give details about profit and growth rate.
So, these are the four main ways of bookkeeping. Usually, companies use the last two methods together or within single-entry or double-entry to present explanatory and detailed reports to the employers and finance team. Need help with liquidation in UAE? Visit our site today!