Elements of Book-keeping

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Tally Solutions, Nov-28-2019

 

Bookkeeping is a task concerned with the recording of financial data relating to business operations in a significant and orderly manner. It envelopes all the procedural aspects of accounting work and embraces record-keeping function. In this article, we have discussed the list elements of bookkeeping and instance of entries which becomes part of bookkeeping.

Bookkeeping procedures are governed by the end product, the financial statements. And ‘financial statements’ includes Profit and Loss Account and Balance Sheet including Schedules and Notes forming part of Accounts.

Elements of Bookkeeping

Elements of Bookkeeping

Journals

In the system of Bookkeeping, the journals are the first place you can look to find complete information about a transaction. The general journal, used by many businesses that employ a double-entry accounting system, records the debit and credit amounts for each account as transactions occur. It may also list a short description of the transaction. For example, some businesses may have specialized journals, each for recording a specific kind of transaction depending on their needs

Ledgers

Ledgers group transactions according to account and the effect it has on the business. Such grouping or categories in the ledger may include assets, liabilities, expenses and revenue. Transactions from business journals get posted or recorded to the ledgers periodically. And with the help of ledgers, the financial position of the business can be easily ascertained as well.

Financial statements

They communicate the essential information about the financial situation of a company to outside parties. Most bookkeeping systems use four major financial statements.

  • Balance sheet: - It gives a description of a company's financial position for a particular date, by listing details of its assets, liabilities and shareholder's equity.
  • Income Statement: - It displays the businesses net earnings for a specific period.
  • Cash flow statement: - It picturizes the increases and decreases in cash for a period as it relates to business operations, investment and financing activities of a business.
  • Statement of shareholders: - It displays the changes in the company's retained earnings, by listing items like net income for the year and dividends paid to shareholders.

What kind of entries do find its place in Bookkeeping?

Essentially, bookkeeping means recording and tracking the numbers involved in the financial side of the business in an organized way. It is essential for businesses but is also useful for individuals and non - profit organizations.

Any transaction, whether it is a question of purchase or sale, must be recorded. And the person(s) responsible for bookkeeping for business would record all transactions that are related. The following are some examples of entries which forms part of bookkeeping.

  • Expense payments to suppliers
  • Loan payments
  • Customer payments for invoices
  • Monitoring asset depreciation and booking adjustments
  • And so on….

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