Subject Matter of Book Keeping
The Meaning of Book Keeping
Book-keeping is an art of recording financial business transaction in a set of books in terms of money or money worth.
Bookkeeping involves the recording, storing and retrieving of financial transactions for a company, nonprofit organization and individuals.Prior to computers and software, the bookkeeping for small businesses usually began by writing entries into journals. Journals were defined as the books of original entry. In order to reduce the amount of writing in a general journal, special journals or day books were introduced. The special or specialized journals consisted of a sales journal, purchases journal, cash receipts journal, and cash payments journal.The image below shows purchase which was recorded in a day book. This was before the current development of communication technology.
Common financial transactions and tasks that are involved in bookkeeping include:
- Billing for goods sold or services provided to clients.
- Recording receipts from customers.
- Verifying and recording invoices from suppliers.
- Paying suppliers.
- Processing employees’ pay and the related governmental reports.
- Monitoring individual accounts receivable.
- Recording depreciation and other adjusting entries.
- Providing financial reports.
Today bookkeeping is done with the use of computer software. For example, Quick-books (from Intuit) is a low-cost bookkeeping and accounting software package that is widely used by small businesses.
Bookkeeping requires knowledge of debits and credits and a basic understanding of financial accounting, which includes the balance sheet and income statement. In principle transactions have to be recorded daily into the books or the accounting system
For each transaction, there must be a document that describes the business transaction, in the terms of a simple sales invoice, sales receipt, a supplier invoice, a supplier payment, bank payments and journals.