Bookkeeping
From Wikipedia, the free encyclopedia
Bookkeeping is the recording of financial transactions. Transactions include sales, purchase, income and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Bookkeeping should not be confused with accounting. The accounting process is usually performed by an accountant. The accountant creates reports from the recorded financial transactions recorded by the bookkeeper. There are some common methods of bookkeeping such as the Single-entry bookkeeping system and the Double-entry bookkeeping system. But while these systems may be seen as "real" bookkeeping, any process that involves the recording of financial transactions is a bookkeeping process.
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[edit] Bookkeeper
A bookkeeper (or book-keeper), also known as an accounting clerk or accounting technician, is a person who records the day-to-day financial transactions of an organization.[1] 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.
[edit] 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.[2]
[edit] Single-entry system
The primary bookkeeping record in single-entry bookkeeping is the cash book, which is similar to a checking (chequing) 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[3]
| 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 |
[edit] 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)[4]
| 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 | ||||
[edit] Double-entry system
[edit] Daybooks
Daybook is a descriptive and chronological (diary-like) record of day-to-day financial transactions also called a book of original entry. The Daybook's details must be entered formally into journals to enable posting to ledgers. Daybooks include:
Sales daybook recording all the sales invoices.
Sales credits daybook recording all the sales credit notes.
Purchases daybook recording all the purchase invoices.
Purchases credits daybook recording all the purchase credit notes.
Cash daybook, usually known as the cash book, recording all money received and money paid out. It maybe split into two daybooks: receipts daybook for money received in, and payments daybook for money paid out.
[edit] Petty Cash Book
Petty cash book is a record of small value purchases usually controlled by imprest system.
[edit] 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.
[edit] 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 (sometimes called a Sales ledger).
Supplier ledger of financial transactions with a supplier (sometimes called a Purchase ledger).
General (nominal) ledger representing assets, liabilities, income and expenses.
[edit] Interchangeable Terms
Debtors Ledger/Customers Ledger/Sales Ledger/Accounts Receivable Ledger
Creditors Ledger/Suppliers Ledger/Purchases Ledger/Accounts Payable Ledger
General Ledger/Nominal Ledger
[edit] 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.
[edit] 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.
[edit] 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:
- Mobile employees scanning and sending in their receipts and bills while on the road to get reimbursed more quickly.
- Organizations with multiple offices centralizing their accounting department and having the documents scanned and sent to this location.
[edit] Terminology
[edit] US/International English spelling
| US English | Int. English |
|---|---|
| Check | Cheque |
| Checking Account | Current Account |
On an interesting note bookkeeper is the only word in the English language to have three sets of double letters in succession.
[edit] 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.
[edit] Notes and references
- ^ Williams, Jan R.; Susan F. Haka, Mark S. Bettner, Joseph V. Carcello (2008). Financial & Managerial Accounting. McGraw-Hill Irwin. pp. p.26. ISBN 9780072996500.
- ^ Pinson, Linda; Jerry Jinnett (1993). Keeping the Books, Second Edition. Upstart Publishing Company, Inc.. pp. 10. ISBN 0936894474.
- ^ Pinson, p.25.
- ^ Illustration based on transaction register provided with personal checks from http://www.deluxe.com in 2003.
