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From Wikipedia, the free encyclopedia

Bookkeeping (book-keeping or book keeping) is the recording of the value of assets, liabilities, income, and expenses in the daybooks, journals, and ledgers, which debit and credit entries are chronologically posted to record changes in value. Bookkeeping is often mistaken for accounting, which is the system of recording, verifying, and reporting such information. Practitioners of accounting are called accountants.

Bookkeeping is undertaken by individuals and organizations including companies and legal persons. It refers to "keeping records of what is bought, sold, owed, and owned; what money comes in, what goes out, and what is left." [1] Bookkeeping is parted into accounting periods, and bookkeepers' work is closely related to that of accountants.

Individual and family bookkeeping involves keeping track of income and expenses in a cash account record, checking account register, or savings account passbook. Individuals who borrow or lend money track how much they owe to others or are owed from others.

Bookkeeping may be performed using paper and a pen or pencil or using computer software.

Bookkeeper

A bookkeeper (or book-keeper), sometimes called an accounting clerk in the United States, is a person who records the day-to-day financial transactions of an organization.[2] A bookkeeper is usually responsible for writing up the "daybooks." The daybooks consist of purchase, sales, receipts and payments. The bookkeeper is responsible for ensuring all transactions are recorded in the correct daybook, suppliers ledger, customer ledger and general ledger. The bookkeeper brings the books to the trial balance stage. An accountant may prepare the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper.

Bookkeeping systems

Two common bookkeeping systems used by businesses and other organizations are the single-entry bookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping uses only income and expense accounts, recorded primarily in a revenue and expense journal. Single-entry bookkeeping is adequate for many small businesses. Double-entry bookkeeping requires posting (recording) each transaction twice, using debits and credits.[3]

Single-entry system

The primary bookkeeping record in single-entry bookkeeping is the cash book, which is similar to a checking (cheque) account register but allocates the income and expenses to various income and expense accounts. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory and travel expenses.

Sample revenue and expense journal for single-entry bookkeeping[4]

No. Date Description Revenue Expense Sales Sales Tax Services Inventory Advert. Freight Office Suppl Misc
7/13 Balance forward 1,826.00 835.00 1,218.00 98.00 510.00 295.00 245.00 150.00 83.50 61.50
1041 7/13 Printer- Advert flyers 450.00 450.00
1042 7/13 Wholesaler - inventory 380.00 380.00
1043 7/16 office supplies 92.50 92.50
-- 7/17 bank deposit 1,232.00
- Taxable sales 400.00 32.00
- Out-of-state sales 165.00
- Resales 370.00
- Service sales 265.00
bank 7/19 bank charge 23.40 23.40
1044 7/19 petty cash 100.00 100.00
TOTALS 3058.00 1,880.90 2,153.00 130.00 775.00 675.00 695.00 150.00 176.00 184.90

Single account bookkeeping

Simple bookkeeping for individuals and families involves recording income, expenses and current balance in a cash record book or a checking account register.

Sample checking account register (United States, 2003)[5]

AD=Automatic Deposit, AP=Automatic Payment, ATM=Teller Machine, DC=Debit Card
NUMBER
OR CODE
DATE TRANSACTION DESCRIPTION PAYMENT AMOUNT  /  FEE DEPOSIT AMOUNT BALANCE
balance forward 1331 85
AD 3/15 paycheck 1823 56 3155 41
AP 3/26 electricity 104 31 3051 10
704 3/26 car registration 58 50 2992 60
ATM 3/30 cash withdrawal 100 00 1.00 2891 60
DC 4/2 groceries 127 35 2764 25

Double-entry system

Main article: double-entry bookkeeping system

Daybooks

Daybook is a descriptive and chronological (diary-like) record of day-to-day financial transactions or a book of original entry rarely kept for the entries are now contained in original documents such as invoices and supporting documents. Daybook's details must be entered formally into journals to enable posting to ledgers. Daybooks include:

Sales daybook of the sales invoices.

Sales credits daybook of the sales credit notes.

Purchases daybook of the purchase invoices.

Purchases credits daybook of the purchase credit notes.

Cash daybook, usually known as cash book, of cash received and paid out. It may comprise two daybooks: receipts daybook of cash received, and payments daybook of cash paid out.

Petty Cash Book

Petty cash book is a record of small value purchases usually controlled by imprest system.

Journals

Journal is a formal and chronological record of financial transactions before their values are accounted in general ledger as debits and credits. If daybooks are not kept, the journals are books of original entry, where the transactions are first recorded, hence often considered synonymous with daybooks. Special journals include: sales, purchases, cash receipts, cash disbursements, and payroll. General journal is a record of the entries not included in other journals.

Ledgers

Ledger (or book of final entry) is a record of accounts, each recorded individually (on a separate page) with its balance. (Ledger is also a book holding such records.) Unlike the journal listing chronologically all financial transactions without balances, the ledger summarizes values of one type of financial transactions per account, which constitute the basis for the balance sheet and income statement. Ledgers include:

Customer ledger of financial transactions with a customer.

Supplier ledger of financial transactions with a supplier.

General (nominal) ledger representing assets, liabilities, income and expenses.

Interchangeable Terms

Debtors Ledger/Customers Ledger/Sales Ledger/Accounts Receivable Ledger

Creditors Ledger/Suppliers Ledger/Purchases Ledger/Accounts Payable Ledger

General Ledger/Nominal Ledger

Chart of accounts

Chart of accounts is a list of the accounts codes that can be identified with numeric, alphabetical or alphanumeric codes allowing the account to be located in the general ledger.

Computerized bookkeeping

Computerized bookkeeping removes many of the paper "books" that are used to record transactions and usually enforces double entry bookkeeping. Computer software increases the speed at which bookkeeping can be performed.

Online bookkeeping

Online bookkeeping allows source documents and data to reside in web-based applications which allow remote access for bookkeepers and accountants. All entries made into the online software are recorded and stored in a remote location. The online software can be accessed from any location in the world and permit the bookkeeper or data entry person to work out of the office rather than in the office. The paperwork can either be delivered to the bookkeeper. Or a company can scan its business documents and upload them to a secure location or into an online bookkeeping application on a regular basis. This allows the bookkeeper to work remotely with these documents to update the books. Users of this technology include:

Terminology

US/International English spelling

US English Int. English
Check Cheque
Checking Account Current Account

Jargon

Footing and cross-footing are bookkeeping terms for summing a table of numbers by column (down) and by row (across), respectively. Other names for these terms are casting and cross-casting and totting and cross-tot.

Notes and references

  1. ^ Fields, Louis W. (1990). Bookkeeping Made Simple, Revised Edition. Doubleday. pp. 9–10. ISBN 0385238827. 
  2. ^ Williams, Jan R.; Susan F. Haka, Mark S. Bettner, Joseph V. Carcello (2008). Financial & Managerial Accounting. McGraw-Hill Irwin. pp. p.26. ISBN 9780072996500. 
  3. ^ Pinson, Linda; Jerry Jinnett (1993). Keeping the Books, Second Edition. Upstart Publishing Company, Inc.. pp. 10. ISBN 0936894474. 
  4. ^ Pinson, p.25.
  5. ^ Illustration based on transaction register provided with personal checks from http://www.deluxe.com in 2003.
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