Why Your Books Matter

Posted on Oct 8, 2012 | 0 comments


Why do you, or any self-employed person or a business keep accounts? Or the proverbial shoe box full of receipts, which is sometimes still the case?

The shoe box is kept because the keeper simply wants to obtain deductions to reduce their payable tax. But most business people want something more. So they keep books of account.

These “books” are rarely today actual books of course but more usually electronic databases, increasingly often stored “in the Cloud”. And certainly we all want and expect to have our deductions allowed and our taxable income, and hence the tax we must pay, appropriately reduced.

While correct tax calculations are important and while accurate books are necessary to make correct tax calculations there are arguably more important reasons for keeping accurate books.

The “books” matter because without them we would not only not know the correct tax we owe (and hence be even more at the mercy of the tax office), we would not know how our business was progressing one month to the next, one year to the next. We would not know whether a profit or a loss had been made or if our latest marketing campaign was effective or simply a waste of money.

This much is probably common wisdom; most business people see the need for accurate accounting records. However according to a new book there is much more to the story.

Jane Gleeson-White, in Double Entry – How the merchants of Venice shaped the modern world, describes how modern bookkeeping was developed in the 15th Century by Venetian merchants and consolidated and explained systematically in 1494 by the Franciscan monk Luca Pacioli, a  mathematician and friend of (and probable teacher of mathematics to) Leonardo da Vinci.

Gleeson-White goes on to argue a well-founded case that double entry bookkeeping was the foundation of John Maynard Keynes development of national accounts (the accounts of countries, non-existent prior to the 20th Century).

More significant still, she convincingly puts the case that the double entry bookkeeping efforts of the merchants of Venice was integral to the development of modern capitalism, the very basis of our modern economy.

JWA has a number of Bookkeeping options available for our clients. Give us a call on 5585 8555 if you’d like to discuss making your life simpler and getting your books in order.


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