Finding it difficult to keep control over costs? Don’t have a clue about exactly how much profit you make? Any idea how much your debtors owe you? Can you afford the new machinery? Don’t know how the numbers will stack up next year? Don’t know what figures to share with the prospective investors? If any of the above is a challenge you face as an MSME/SME/Startup, please read on.
You start a business with the goal of providing a product or service and earning revenue. Keeping tabs on the revenue and profits is the only way to know how the business is performing and whether it is a viable value proposition. As your startup picks up and you generate more revenue, your bookkeeping will become more complex. Hence the need to start a well-structured system when you start your business. Here is where financial accounting comes in.
Generally, businesses, in their initial stages follow the cash basis of accounting where they keep tabs on what was paid or received. However, as the business grows, it is important to switch to an accrual basis of accounting to have a clear picture of financials.
The basic flow of financial accounting includes –
Profit & Loss Account
The financial statements are drawn up mainly to present the business information to external stakeholders. In addition, financial accounting provides the basis for financial and management reporting to analyses the data available and arrive at actionable insights for management.
The benefits of financial accounting- (Advantages)
(Document Required format) Maintenance of Books of Accounts
Income Tax Act, Companies Act 2013 and GST Act require books of accounts including vouchers and receipts to be maintained.
Under Income Tax Act
- If the sales/turnover/gross receipts from the business or profession is more than Rs 25,00,000 or income is more than Rs 2,50,000 in any of the previous 3 years, then books of accounts will need to be mandatorily maintained. Bools will have to be maintained for 6 years from the end of the relevant year.
Under Companies Act
- Every company has to maintain its books of accounts at the registered office or any other office that the board of directors may decide. In the latter case, the company will need to inform the Registrar of Companies. Records can also be maintained in electronic form. Books should be maintained for a period of 8 years from the end of the relevant financial year.
Under GST Act
- Every registered person has to maintain GST records at the principal place of business. Books will need to be maintained for 6 years from the last date of filing the annual return for that year.
General practices to choose and apply the name are:
Name should be distinct and unique.
Name should be short and simple.
Name should not contain any restricted words.
Name should not infringe any Trademark Registered and should not be identical to any company or LLP registered.
SC are required to file various eForms on MCA portal, digitally sign documents for the incorporation of the company and other applications.
Application for online registration of the company is required to be made online using SPICe INC-32 form along with e-MOA & e-AOA. DIN PAN, TAN etc. are to be filed along with SPICE INC-32.
On review and verification and after satisfaction, Registrar may issue the Certificate of Incorporation showing the Corporate Identification Number (CIN) and date of incorporation of the company along with the PAN and TAN of the company.
After depositing the initial capital in the bank account of the company, it is required to file form INC-20A for Commencement of Business post which a company can commence its business.
Still need reasons to keep your accounting and book keeping updated
The success of your startup is dependent on managing your budget, balancing your books and making informed decisions based on the financial data available. Effective accounting practices and good financial management enhances ROI for all the stakeholders.
How Startup- Movers can help you?
At Startup Movers, we offer accounting and bookkeeping services to startups. We offer end to end services from journal entries to financial reporting. We make financial accounting services a breeze for you so that you can concentrate on running your business and leave the number-crunching to us. These services are offered remotely. No matter where you are, we can handle your accounting for you.
Doing these mentioned below activities will give you a head start to focus on your business and make informed data-based decisions while we manage the accounting side of things and deliver all the reports to you. Financial accounting is the backbone of the accounting process and the basis for all the business numbers and ratios. An efficient financial accounting system at the initial stages of a startup gives you a good opportunity to use accurate data to plan the future on a strong footing. So, opt for outsourced financial accounting services from Startup Movers and kickstart your growth plan.
How Startup- Movers can assist you?
How Startup- Movers can assist you?
- Payroll reconciliation
- Account reconciliation
- Bank Reconciliation
- Accounts Receivable
- Accounts Payable
- Preparation of management accounts and statutory accounts