What is Bookkeeping in Accounting? (Learn in 5 minutes)

Let us know as to What is Bookkeeping in Accounting which is a crucial part of our topic. We will also clear that Book-keeping and Accounting are not one and the same. The relationship between the two as well.

Bookkeeping is the process of recording all the business transactions in the books of accounts in a systematic and logical manner. The Purpose of the Bookkeeping is to record the financial transactions and show the effect of these recorded transactions in the financial statements to disclose the financial performance and position

What is Bookkeeping?

Bookkeeping is the complete process of recording and classifying financial transactions in the books of accounts in a systematic and logical manner. With the help of proper it, a company or organisation is able to track its expenses, incomes, assets, liabilities, equity or owners capital. It helps in maintaining records of all the Journals, ledger accounts, subsidiary books and completing the tasks of payroll.

It helps in preparing and presenting the financial statements such as the Balance Sheet and Profit & Loss statement. This ultimately helps in knowing the financial performance and financial standings as well.

It also helps in maintaining accurate financial information which helps further in making decisions by management, investors, suppliers, creditors, debtors in knowing the creditworthiness and financial performance of the business entity. Hence a Bookkeeper plays a crucial role in any organisation to record business transactions and maintain financial records.

The Features of Bookkeeping are:

* To collect and produce the relevant source documents to record the transactions

* The complete record of Financial Transactions in a systematic and logical manner in books of accounts

* To classify the accounts as Asset, Liability, Expense, Income, Equity capital

* Posting the accounts in the relevant ledger accounts

* Balancing all the relevant ledger accounts to know the debit and credit balance of ledger accounts

* Completing the process of Payroll accounting

* Maintaining the books of accounts such as Journals, Ledgers, Subsidiary books

* Prevention and detection of frauds and errors to ensure accuracy of accounts

The Objectives of Bookkeeping are:

*The complete record of business transactions:

The main objective is the record of financial transactions in the books of accounts in a systematic and logical manner. This recording phase includes passing journal entries, posting them to ledger accounts and balancing the ledger accounts and classifying the accounts as asset, expense, liability, incomes, equity capital.

*To ascertain the financial effect on financial statements:

The secondary objective is to ascertain the financial effect of recorded transactions on financial statements. This helps to prepare reliable and accurate financial information in financial statements.

The Importance of Bookkeeping for business are:

* It helps in planning the budget for expenses, incomes. This helps in easily making a budget for future expenses and incomes as well

* It helps in maintaining the systematic record of all the business transactions in books of accounts

* It also helps to be prepared for the Tax return filing with the relevant department

* It helps in meeting the accounting and financial goals in many aspects

* It helps to produce the financial information which is required to prepare the financial statements such as Balance sheet, profit and loss accounts

* It helps in completing the payroll accounting which is the crucial part ever seen

* It also helps in taking decisions by the bookkeepers and management regarding the recording transactions, maintaining the books of accounts, prevention and detection of frauds or errors.

Methods of Bookkeeping:

There are generally the two most important methods. They are the Double Entry System and the Single Entry System. The double-entry system is concerned with the recording of transactions in dual aspect as debit and credit aspect. But under the single entry system, only one aspect of the transaction is recorded, either the receiving aspect or the giving aspect which is unscientific and not a systematic manner of recording the transactions. While the double-entry system is the complete, reliable and scientific method.for recording the business transactions.

Bookkeeping is a part of Accounting:

Most of the people have an opinion that Bookkeeping and Accounting are one and the same and use these two terms as synonyms. But they are not the same. Bookkeeping is the part of Accounting as we know that Bookkeeping is the recording phase and Accounting is the summarising phase of the accounting system. Accounting starts where Bookkeeping ends.

The preparation and presentation of financial statements do not form part of Bookkeeping. It is the part of Accounting. Thus, Accounting is far superior to Bookkeeping in many aspects. But the relationship between the two is essential to make the Accountancy complete and produce reliable, accurate financial information for the management and users of financial information

Conclusion:

Thus, now we can explain as to what is bookkeeping in accounting? It's features, types, methods as well. Bookkeeping is the complete process of recording and classifying financial transactions in the books of accounts in a systematic and logical manner

What are Ledgers?

What is Trial Balance?

What are Financial Statements? Its features, types, uses

What is Income Statement (Profit and loss a/c)?

What is Balance Sheet (Position Statement)?

What is Cash Flow Statement?

What are Subsidiary Books? Its features, types, objectives, uses

What is Single Entry System? Its features, types, objectives, uses

What is Double Entry System? Its features, objectives, uses