What is Bookkeeping?
June 23rd, 2010
Bookkeeping is the recordkeeping of the money values of the transactions of a business. Bookkeeping grants the details from which accounts are prepared but is a different process, preliminary to accounting.
Predominantly, bookkeeping finds two kinds of information: (1) the current value, or equity, of an entity and (2) changes in value—profit or loss—taking position in the enterprise during a particular time period.
Management officials, investors, and credit grantors all need to have this kind of information: management so as to analyse the results of operations, to control costs, to budget for the future, and to make financial policy decisions; investors to understand the outcome of business operations and make decisions regarding buying, holding, and selling securities; and credit grantors so as to judge the financial statements of an enterprise in judging whether to accept a loan.
Bits and pieces of financial and numerical recordkeeping are uncovered for nearly every society with a commercial background. Records of trading contracts have been uncovered in the archaelogy of Babylon, and accounts for both farms and estates have been archived in ancient Greece and Rome. The two-entry process of bookkeeping started with the progression of the commercial republics of Italy, and instruction manuals for bookkeeping were developed during the 15th century in various Italian cities.
Within the late 18th and early 19th centuries, the Industrial Revolution granted a significant stimulus to accounting and bookkeeping.
The progression of manufacturing, trading, shipping, and subsidiary services made accurate financial records a requirement. The ancestry of bookkeeping, in fact, resembles the past of commerce, industry, and government and, in some part, assisted shaping it. The global expansion of industrial and commercial activity required greater cosmopolitan decision-making methods, which itself required better sophistication in the selection, classification, and presentation of information, more so with the progression of computers. Taxation and government regulation became more important and resulted in greater need for information; businesses had to show available information to go with their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also became sizeable, and the need for bookkeeping for their inner departmental operations became higher.
While bookkeeping methods can be rather detailed, all are based on two types of books employed in the bookkeeping procedure—journals and ledgers. A journal must have the daily transactions (sales, purchases, and so on), and the ledger contains the information of individual accounts. The daily records kept in the journals are put in the ledgers.
At the end of every month, generally speaking, an income statement and a balance sheet are prepared from the trial balance posted out of the ledger. The purpose of the income statement or profit-and-loss statement is to give an analysis of the changes that happen in the ownership equity because of the transactions of the period. The balance sheet displays the financial condition of the corporation at any particular point in time taken from assets, liabilities, and the ownership equity.
For information about MYOB bookkeeping brisbane or MYOB training brisbane, contact Stone Consulting. Stone Consulting also does bookkeeping in Redlands.
Sphere: Related ContentCategories: General Travel Information |
