In the previous post, we covered accounting basics and UAE-based tax regulations. In this post, we will cover basic bookkeeping skills, accounting software and tools, and understanding financial statements. While the basics of accounting and tax regulations can be learned with your research, software and bookkeeping require help from experts, and that’s why we are here to explain everything using an expert’s experience and skills.
Basic Bookkeeping Skills
Many people confuse bookkeeping and accounting as the same thing. If you are someone who is puzzled by the difference between accounting and bookkeeping, don’t worry; we are here to sort out all your confusion. While bookkeeping is concerned with recording your day-to-day financial transactions, accounting is concerned with analyzing, classifying, interpreting, reporting, and summarizing financial data. Bookkeeping is the groundwork on which accounting is built, such that all financial transactions are properly recorded and classified, which is required for the preparation of financial statements and making business decisions. As an accounting foundation, bookkeeping is something that’s important for all industries regardless of their size.
The key bookkeeping tasks are:
- Record Daily Financial Activities
- Managing accounts Payable and Receivable
- Bank settlements
- Calculate Financial Statements like Profit and Loss reports and Balance Sheets
- Payroll Management of all Indirect Expenses
- Handling Amounts of Small Purchases
At the beginning of building your own business, establishing a solid bookkeeping system is important as it creates a great foundation. Your perfect bookkeeping system can be chosen by considering some important factors like business needs, budget, scalability, integration capabilities, user-friendliness, and reporting or analytics features. There are different methods of bookkeeping that you can select based on your needs. Some of them are:
Single-entry or Double-entry Bookkeeping:
- Single entry bookkeeping records every transaction once, either as income or expenses. It is easy to maintain and less time-consuming but has limited financial awareness and a high error risk. This method is best suitable for small businesses and sole proprietors that don’t buy or sell credit, own little to no physical assets, and hold small amounts of inventory.
- Double entry bookkeeping records every transaction in two accounts, one in debit and one in credit. It provides a clear financial picture, reduces errors, and abides by accounting standards. It can be more complex and time-consuming, but it’s best for businesses of large sizes and public businesses.
Cash-based or Accrual-based Bookkeeping:
- In cash-based bookkeeping you add the expenditure or sales when you receive the cash or when it is paid, that is, whenever cash comes in or goes out. It is simple, easy to track, and good for tax recording, but it’s not suitable when you have to show the money that you owe. It’s best for small businesses without inventory or businesses focused on cash flow.
- In accrual-based bookkeeping records income when they are earned or incurred, not when the cash flows. It reflects the true financial health of your company and matches income with expenditure more accurately. This method is most used in medium to large companies or those companies needing detailed financial tracking, not just based on cash flow.
- There is also a method where we can mix both these types of bookkeeping which is called hybrid-based bookkeeping. It’s best for businesses that need to track both their cash flow as well as the financial reporting.
Bookkeeping has many advantages for a business. It helps keep accurate financial records by ensuring all invoices, receipts, and payments are properly recorded. With organized finances, making clear decisions about budgeting and planning becomes easier. It also ensures that taxes are paid on time and that the business stays tax-compliant. Bookkeeping helps analyze business performance, identify weaknesses, and make necessary improvements. It also boosts the company’s credibility, attracts investors, and saves both time and money in the long run.
Using Accounting Software and Tools
Why do things manually when technology can make life easier? Technology is making life easier in so many ways, and accounting is no different. Doing accounting manually now seems outdated when software can make the process faster, more accurate, and easier to manage. Accounting software takes care of time-consuming tasks like entering data, creating invoices, matching bank transactions, and generating financial reports. This saves time and reduces mistakes. Whether you run a small shop or a big company, software helps you work faster, understand your finances better, and stay organized for taxes.
While manual accounting takes a lot of time, there are higher chances of error, it takes too much time, and it’s hard to scale as business grows. Accounting software makes most of the tasks automated, instant clear reports are made, it easily handles more transactions, and it is stored in secure cloud storage.
The key features of accounting softwares are:
- Invoice and Billing management
- Budgeting and Forecasting
- Financial Reporting
- Asset Tracking
- Tax Preparation
- Multi-user Access
It’s very important that you choose the right software according to your business. In the table below we have put together some of the popular options and their unique features:
| Software | Used For | Key features |
| Tally | Small businesses | Cheque printing, Instant reports, automatic bank reconciliation etc.. |
| QuickBooks | Small to Medium businesses | Invoicing, Payroll, tax tracking |
| Freshbooks | Freelancers, Service based | Time tracking, Invoicing, Expenses |
| Zoho Books | Small and Medium Businesses | End to End Accounting, Tax Compliance and Inventory tracking |
| Xero | Small to large businesses | Band feeds, Payroll, Reporting |
| Wave | Freelancers, small businesses | Free invoicing, receipts, reports |
More than a tool, accounting software is a game changer in the accounting industry. It helps cut down errors, saves time and keeps everything organised from day to day expenses to tax compliance. No matter the size of your business, accounting software helps you stay on top of your finances and focus on growing your business with confidence.
Understanding Financial Statements
Financial Statements show a company’s financial position and performance. It includes their balance sheet, income statement, cash flow statement and statement of changes in equity. Ability to read the financial statement or understand the financial health of a company is one of the most basic skills entrepreneurs, investors and managers should have.
There are three main types of financial statement:
- Income Statement: This document shows the revenue and expenses of the company, making you aware of the profit or loss.
- Balance Sheet: Shows your businesses assets, its liabilities and what’s left at a specific period.
- Cash Flow Statement: Tracks the money that comes in and goes out, making you aware of the cash left for your business.
There are some common mistakes to avoid while reading your financial statements. Always look closely into your cash flows, as even if the company is running on profits, there are chances you can run out of cash. Don’t miss the small expenses that your company does, as they add up to large amounts, and always be aware that profit doesn’t mean cash in hand.
Managing your accounts doesn’t have to be complicated. With basic bookkeeping skills, the right accounting software, and a good understanding of financial statements, you can keep your business organized and on track. These tools help you save time, avoid mistakes, and make better decisions.
This wraps up our “Art of Managing Your Own Accounts” series. By now, you should have a solid understanding of accounting basics, bookkeeping, tax rules, and financial statements—everything you need to know to handle your accounts with confidence. Remember, accounting isn’t just about numbers; it’s about understanding your business and helping it grow.