Bookkeeping is used in the context of the business industry. It simply refers to the recording of financial transactions. These may include sales, payments, purchases and receipts of a particular organization or individual. Professionals known as bookkeepers, who may work independently or as part of a larger company, perform bookkeeping services.
Usually this field is mistaken for accounting. This confusion is understood because most accounting processes include some amount of bookkeeping work. However, this is only a small fraction of the work done by accountants. These individuals are responsible for putting together reports that are based of the records by bookkeepers. They use these to complete all the forms mandated by the government.
Single-entry and double-entry systems are commonly employed in these services. Virtually all tasks involved the recording of financial transactions fall within this category of keeping. A bookkeeper, also known as an accounting technician or accounting clerk, is the individual who is in charge of writing the daybooks. These include sales, purchases, payments and receipts.
The professionals are responsible for guaranteeing that the transactions are properly recorded in the correct book, whether it be the general, suppliers or custom ledgers. They must also bring the books to trial balance. Once that has been done, an accountant will prepare the income statement, as well as balance sheet, based off of the trial balance and ledgers provided by the keeper.
As this practice is an important one, it is recommended that companies hire professionals to do the work needed. These keepers may utilize entry systems to help keep things organized. The two most common are single and double. The former uses only expense and income accounts that were recorded primarily in a revenue and expense book. These suffice for most small businesses. Double-entry systems require the recording of each transaction two times, applying debits and credits.
Daybooks are descriptive and chronological records that are kept of the day-to-day financial transactions. These are also referred to as books of original entry. They may include daybooks such as cash, sales credits, general journal, petty cash, purchase credits and sales.
Journals are kept within the general journal daybook. They are a record, chronological and formal, of values before they have been accounted for within the general ledger as credits and debits. Companies may choose to have one or multiple journals for tracking these transactions. In cases where there are multiple, they are separated by activity: revenue, sales, cash receipts and more. This simplifies the summary and referencing that will take place later. With every debit entry added there should be an equal credit entry. This ensure the balance of the total equation.
Ledgers are basically the records of every account. These accounts are recorded individually with their ending and beginning balances. A ledger will take every single transaction that is listed in a journal and record it in its corresponding account. This also what is used to sum the total on every account that is transferred to the balance sheet and income statement. The three types of ledgers used in this practice: general, purchase and sales.
Bookkeeping services are available to both individuals and companies. They involve various processes associated with tracking all financial transactions that are carried out. Although a part of accounting, this practice is not entirely the same.
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