Bookkeeping is a process or activity done to record each and every financial transaction done by an individual or organization. A financial transaction can be referred as an event involving money in it. The track of income and expenses by an individual and family is done in varied record books like cash account record, checking account register, or saving account passbook.
Previously, bookkeeping was performed using pen or pencil, but nowadays due to increase in tax regulation and to minimize calculation errors the process is done using accounting software.
Origin of bookkeeping
The process of bookkeeping started in the Neolithic Middle East in about 8500 BC, after the invention of agriculture. Extinction of the dark ages has seen expansion of trade system, which was too vast to be managed by a single family. The earliest set up of modern banks was found in this period only.
Methods of bookkeeping
Types of bookkeeping methods used by businesses and organizations are:
- Single entry bookkeeping system
- Double entry bookkeeping system
Single account bookkeeping: Single account bookkeeping is simplest form of bookkeeping system used by individuals and families to record income, expenses and current balance. The recording of transactions is done in a cash record book and a checking account register.
Single entry bookkeeping system: Single entry bookkeeping system is advisable for small businesses to keep track of income and expense accounts, recorded primarily in a Revenue and Expense Journal. Petty cash, accounts payable and receivable, and other relevant transactions such as inventories and travel expenses are recorded and maintained in separate accounts.
Double entry bookkeeping system: Double entry bookkeeping system records each financial tractions twice, involving debits and credits.
Advancements in bookkeeping system
Online bookkeeping system: Advancements in bookkeeping system have facilitated storage of source documents and data in web-based applications to provide remote access for bookkeepers and accountants. Companies usually load their business documents in a secure online bookkeeping location on regular basis, so that, bookkeepers can remotely update these documents. Mobile employees, who scan and send their bills and receipts on the road, and companies with multiple offices are some of the major users of online bookkeeping system.
Terms related to bookkeeping system:
Computerized bookkeeping: Computerized bookkeeping has replaced usage of the books from the system to the accounting computer software. The usage of the computer softwares has increased the speed and efficiency of recording transactions and double entry bookkeeping system.
Bookkeeper: A bookkeeper or an accounting clerk has a duty to maintain books of an organization or company. The bookkeeper updates daybooks, including records of purchase, sales, receipts, and payments. The bookkeeper ensures usage of correct daybook, supplier ledger, and general ledger. Also, he is responsible to carry forward the books to the trial balance level.
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