What is Bookkeeping? – An Article Everyone Can Understand
Posted on May 22, 2010 | No Comments
Ian R L asked:
Bookkeeping is the process of keeping full and up-to-date business records. It’s the recording of financial transactions. Transactions include sales, purchases, income, and payments whether by organizations or individuals. A bookkeeper must make sure all transactions are recorded in the correct daybook, suppliers ledger, customer ledger, and general ledger. Although a bookkeeper is called an accounting clerk, or an accounting technician, don’t confuse bookkeeping with accounting. An accountant uses a bookkeeper’s records to create financial reports. Since the jobs are similar, many bookkeepers have the potential to become (or are) accountants also.
There are two common systems that bookkeepers use to record financial transactions. Small businesses primarily use the single-entry system. This system uses only income and expense accounts, recorded primarily in a revenue (money earned) and expense journal. The double-entry system is more complicated, and makes sure that the books are error-free. This system does this by recording transactions in two different nominal ledgers (two parts) of the books, and using a balance system of debits and credits. Having the data recorded in two different ledgers allows the bookkeeper to recover from an error in one, by looking at the other…at least in theory.
Financial transactions are recorded in several different books. These, starting with the daybook, contains the most detailed records. Sometimes daybooks are not kept, so everything is recorded in journals. The totals in each section (sales, purchases, credits, cash etc.) are recorded in the ledgers. Ledgers also have different sections, and they are used to make the balance sheet and income statement. Ledgers often include:
» Tags:
Bookkeeping is the process of keeping full and up-to-date business records. It’s the recording of financial transactions. Transactions include sales, purchases, income, and payments whether by organizations or individuals. A bookkeeper must make sure all transactions are recorded in the correct daybook, suppliers ledger, customer ledger, and general ledger. Although a bookkeeper is called an accounting clerk, or an accounting technician, don’t confuse bookkeeping with accounting. An accountant uses a bookkeeper’s records to create financial reports. Since the jobs are similar, many bookkeepers have the potential to become (or are) accountants also.
There are two common systems that bookkeepers use to record financial transactions. Small businesses primarily use the single-entry system. This system uses only income and expense accounts, recorded primarily in a revenue (money earned) and expense journal. The double-entry system is more complicated, and makes sure that the books are error-free. This system does this by recording transactions in two different nominal ledgers (two parts) of the books, and using a balance system of debits and credits. Having the data recorded in two different ledgers allows the bookkeeper to recover from an error in one, by looking at the other…at least in theory.
Financial transactions are recorded in several different books. These, starting with the daybook, contains the most detailed records. Sometimes daybooks are not kept, so everything is recorded in journals. The totals in each section (sales, purchases, credits, cash etc.) are recorded in the ledgers. Ledgers also have different sections, and they are used to make the balance sheet and income statement. Ledgers often include: