When should you use an accounting ledger?


Quick Answer

Bookkeeping is an essential cornerstone to growing and maintaining a business, and in its absence finances will inevitably suffer various complications including misplaced funds, unpredictable cash flow and an inability to act on opportunities. Every business should have a set of ledgers to keep its finances straight.

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When should you use an accounting ledger?
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Full Answer

Bookkeeping with ledgers is not a complex process. It is simply record-keeping, an accurate representation of inflow and outflow of funds and the uses those funds are put to. This not only allows a business to assess its own performance, it also allows tax agencies and other external agencies to assess a business's performance and its adherence to tax codes.

Ledgers make use of a technique called double-entry bookkeeping. This technique accounts for both the loss of inventory and the acquisition of funds, providing a comprehensive image of the total exchange of resources. This allows a company to render an easily updated and explicitly detailed record of its means and practices.

Without ledgers, businesses cannot keep an accurate track of their finances. Ledgers allow them to bring order and structure to their profits and expenditures and to make accurate plans for the future in the light of informed projections. These are invaluable advantages, especially to small businesses that require every edge they can get.

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