Bookkeeping

Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, 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.

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 organisation. A bookkeeper is usually responsible for writing 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.

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. These days, single entry bookkeeping can be done with DIY bookkeeping software to speed up manual calculations.

Sample revenue and expense journal for single-entry bookkeeping

Double-entry system

Main article: double-entry bookkeeping system

Daybooks

A 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, for recording all the sales invoices.
• Sales credits daybook, for recording all the sales credit notes.
• Purchases daybook, for recording all the purchase invoices.
• Purchases credits daybook, for recording all the purchase credit notes.
• Cash daybook, usually known as the cash book, for recording all money received as well as money paid out. It may be split into two daybooks: receipts daybook for money received in, and payments daybook for money paid out.

Petty cash book

A petty cash book is a record of small value purchases usually controlled by imprest system. Items such as Coffee, Tea, are listed down in the petty cash book.

Journals

A journal is a formal and chronological record of financial transactions before their values are accounted in general ledger as debits and credits. Journals are recorded in the journal daybook, which is one of the books of first entry. For every debit journal there must an equivalent credit journal. There must be at least two journal entries for every transaction recorded.

Ledgers

A ledger (also known as a book of final entry) is a record of accounts, each recorded individually (on a separate page) with its balance. 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, for financial transactions with a customer (sometimes called a sales ledger).
• Supplier ledger, for financial transactions with a supplier (sometimes called a purchase ledger).
• General (nominal) ledger representing assets, liabilities, income, and expenses.

Chart of accounts

A 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.

Online bookkeeping

Online bookkeeping, or remote 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 from any location with a suitable data communications link.