Accounts and Book Keeping

Book Keeping
1: Up to 50 Entries
2: Up to 100 Entries
3: Up to 150 Entries
4: Up to 200 Entries

Accounting: (Preparation of Trial Balance, Balance Sheet, Profit & Loss Account)

Book Keeping

1: What is Book Keeping ?

Book Keeping is like data entry of accounts, Book Keeping is responsible for the recording of financial transactions. Bookkeeping is the recording, on a day-to-day basis, of the financial transactions and information pertaining to a business. It ensures that records of the individual financial transactions are correct, up-to-date and comprehensive. Accuracy is therefore vital to the process.

Bookkeeping provides the information from which accounts are prepared. It is a distinct process, that occurs within the broader scope of Accounting.

Each transaction, whether it is a question of purchase or Sale, must be recorded. There are usually set structures in place for bookkeeping that are called ‘quality controls’, which help ensure timely and accurate records.

Bookkeeping tasks

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

The person(s) responsible for bookkeeping for a business would record all transactions that are related, including but not limited to:

• Expense payments to suppliers
• Loan payments
• Customer payments for invoices
• Monitoring asset depreciation
• Generating financial reports

Recording transactions

In principle, transactions must be recorded daily into the books or the accounting system.

For each transaction, there must be a document that describes the business transaction. This could include a sales invoice, sales receipt, a supplier invoice, a supplier payment, bank payments and journals.

These accompanying documents provide the audit trail for each transaction and are an important part of maintaining accurate records in the event of an audit.

Double-entry bookkeeping

The double entry system of bookkeeping is based on the fact that every transaction has two parts, which therefore affects two ledger accounts.

Every transaction involves a debity entry in one account and a credit entry in another account. This serves as a kind of error-detection system: if, at any point, the sum of debits does not equal the corresponding sum of credits, then an error has occurred.

Why bookkeeping matters

While it may seem obvious, detailed, thorough bookkeeping is crucial for businesses of all sizes. Seemingly straightforward, bookkeeping quickly becomes more complex with the introduction of tax, assets, loans, and investments.

Tracking the financial activities of a business is the truest purpose of bookkeeping, meaning it allows you to keep an up-to-date record of the current incoming and outgoing amounts, amounts owed by customers and by the business, and more.

ACCOUNTING:

What is 'Accounting'

Accounting is the systematic and comprehensive process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities. Accounting is one of the key functions for almost any business; it may be handled by a bookkeeper and accountant at small firms or by sizable finance departments with dozens of employees at large companies.

BREAKING DOWN 'Accounting'

The reports generated by various streams of accounting, such as cost accounting and management accounting, are invaluable in helping management make informed business decisions. While basic accounting functions can be handled by a bookkeeper, advanced accounting is typically handled by qualified accountants who possess designations such as Certified Public Accountant (CPA) in the United States, or Chartered Accountant (CA), Certified General Accountant (CGA) or Certified Management Accountant (CMA) in Canada.

Creating Financial Statements

The financial statements that summarize a large company's operations, financial position and cash flows over a particular period are concise statements based on thousands of financial transactions. As a result, all accounting designations are the culmination of years of study and rigorous examinations combined with a minimum number of years of practical accounting experience.

Generally Accepted Accounting Principles

In most cases, accountants use generally accepted accounting principles (GAAP) when preparing financial statements. GAAP is a set of standards related to balance sheet identification, outstanding share measurements and other accounting issues, and its standards are based on double-entry accounting, a method which enters each expense or incoming revenue in two places on a company's balance sheet.

Example of Double Entry Accounting

To illustrate double-entry accounting, imagine a business issues an invoice to one of its clients. An accountant using the double-entry method enters a credit under the accounts receivables column and a debit under the balance sheet's revenue column. When the client pays the invoice, the accountant debits accounts receivables and credits revenue. Double-entry accounting is also called balancing the books, as all of the accounting entries are balanced against each other. If the entries aren't balanced, the accountant knows there must be a mistake somewhere in the ledger.

Financial Accounting Versus Management Accounting

Financial accounting refers to the processes accountants use to generate the annual accounting statements of a firm. Management accounting uses much of the same processes but utilizes information in different ways. Namely, in management accounting, an accountant generates monthly or quarterly reports that a business's management team can use to make decisions about how the business operates.

Financial Accounting Versus Cost Accounting

Just as management accounting helps businesses make decisions about management, cost accounting helps businesses make decisions about costing. Essentially, cost accounting considers all of the costs related to producing a product. Analysts, managers, business owners and accountants use this information to determine what their products should cost. In cost accounting, money is cast as an economic factor in production, whereas in financial accounting, money is considered to be a measure of a company's economic performance.

Accrual Method Vs. Cash Method

Financial accounting may be performed using either the accrual method, cash method or a combination of the two. Accrual accounting entails recording transactions when the transactions have occurred and the revenue is recognizable. Cash accounting entails recording transactions only upon the exchange of cash. Revenue is only recorded upon the receipt of payment, and expenses are only recorded upon the payment of the obligation.