What is Bookkeeping?
Bookkeeping is the systematic preparation of the books of account of a business. Bookkeeping determines if the business made profit or loss. The process is consequential and it begins with the collecting, recording, organizing, presenting, and analysis of business data. All the day to day business operation is recorded with given information that pertains whether the same. This later caters to the individual transaction, business transaction, who paid what and at what amount. With all of the Booking procedures, accountants or the petty cashiers are expected to keep a high level of accuracy.
Some Aspects that comes under Book Keeping:
1. Bookkeeping transaction
Bookkeeping records transaction which is related to the money which has been paid to suppliers, loan payment, customer payment for the invoice, the monitoring of assets depreciation rate and other general financial records. However, there is a great difference between bookkeeping and accounting. Due to the similarities of the tasks that are performed people always confuse one to mean the other.
Accounting here implies the tasks that are performed in the management of the business finances by a person –accountant. On the other hand, bookkeeping is the task performed in the recording of the business activities.
2. What is the Importance of bookkeeping?
Bookkeeping outlines the financial position that the business is experiencing within a given time and period. A business can determine if it operates at a profit or loss. This is vehemently captured by the different parameters in bookkeeping. Like the recording of Assets, Capital and liabilities.
It provides valuable information to the different stakeholders of the business. For example through bookkeeping business can determine the value of assets, capital what liabilities do their business have. Besides the later, the bookkeeping information can be provided to banks, government and other parties and still get used for different reasons.
3. Recording Transaction during bookkeeping
First, the goal here is to ensure that all the debit value of the business equals the credit value. All transactions that fall on the debit side of the business-Dry are recorded as well as those that fall on the credit side of the business-Cr. There are guiding principles that guide the later process. The principle of double entry – Any transaction recorded in bookkeeping must have a debit entry corresponding to credit entry. Debit entry records amount receivable while credit entries will record the amount that is payable. All the Debit entry amount will be tallied and compared to the credit entry amount and the result will highlight if there is a deficit or a surplus. A deficit will imply that the business has made losses while surplus will mean good business.
4. Posting from the Books of Accounts
After the recording of the transaction, the accountant will then be required to post the information from the books of the account into the ledgers. The ledger is the book which all information regarding the business transaction is entered. From the ledger, there will be the extraction of information that will be used in the creation of the balance sheet the Trading profit and loss accounts among many other documents.