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What is Bookkeeping Meaning and Definition - ilearnlot

What is Bookkeeping? Meaning and Definition!

Learn, What is Bookkeeping? Meaning and Definition!


The activity or occupation of keeping records of the financial affairs of a business. Bookkeeping is the recording of financial transactions and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization or corporation. There are several standard methods of book-keeping. Such as the single-entry bookkeeping system and the double-entry bookkeeping system but, while they may be thought of as “real” book-keeping, any process that involves the recording of financial transactions is a book-keeping process. Also learn, “The Language of Business” also called Accounting, but Why? What is Bookkeeping? Meaning and Definition!

Bookkeeping is usually performing by a bookkeeper. A bookkeeper (or book-keeper) is a person who records the day-to-day financial transactions of a business. They are usually responsible for writing the daybooks. Which contain records of purchases, sales, receipts, and payments. The bookkeeper is responsible for ensuring that all transactions whether it is cash transaction or credit transaction are records in the correct daybook, supplier’s ledger, customer ledger, and general ledger; an accountant can then create reports from the information concerning the financial transactions recording by the bookkeeper.

Bookkeeping refers mainly to the record-keeping aspects of accounting. Bookkeeping involves preparing source documents for all transactions, operations, and other events of the business. The bookkeeper brings the books to the trial balance stage: an accountant may prepare the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper.

#History of Bookkeeping!

The origin of book-keeping is lost in obscurity, but recent researchers would appear to show that some method of keeping accounts has existed from the remotest times. Babylonian records have been finding dating back as far as 2600 B.C., written with a stylus on small slabs of clay. The term “waste book” was used in colonial America referring to book-keeping. The purpose was to document daily transactions including receipts and expenditures. This was recorded in chronological order, and the purpose was for temporary use only. The daily transactions would then record in a daybook or account ledger in order to balance the accounts. The name “waste book” comes from the fact that once the waste book’s data were transfers to the actual journal, the waste book could discard

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#Meaning of Bookkeeping!

Since the principles of accounting rely on accurate and thorough records, book-keeping is the foundation accounting. Bookkeepers often times has to exercise analytical skills and judgment calls. When recording business events since the source for most accounting information in the system. Book-keeping involves the recording, on a daily basis, of a company’s financial transactions. With proper bookkeeping, companies are able to track all information on its books to make key operating, investing, and financing decisions.

Bookkeepers are individuals who manage all financial data for companies. Without bookkeepers, companies would not be aware of their current financial position, as well as the transactions that occur within the company. Accurate bookkeeping is also crucial to external users. Which include investors, financial institutions, or the government that needs access to reliable information to make a better investment or lending decisions. Simply put, the entire economy relies on accurate and reliable book-keeping for both internal and external users.

#Definition of Bookkeeping!

Bookkeeping, often called record keeping, is the part of accounting that records transactions and business events in the form of journal entries in the accounting system. In other words, book-keeping is the means by which data is entering into an accounting system. This can either be done manually on a physical ledger pad or electronically in an accounting program like Quickbooks.

“Systematic recording of financial aspects of business transactions in appropriate books of account”.

#Understand Bookkeeping for Example!

A good example of the business event that requires analytical skills is the trade-in of a vehicle. The bookkeeper must review the transaction and determine how much the old vehicle trade-in value was and the price paid for the new vehicle. He or she must also find out whether any loans require for the new purchase and how much cash was paid for the transfer. Also read, What are the Different Types of Accounting in a Business?

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As you can see, bookkeepers generally must have a good understanding of accounting principles and GAAP in general. Once the business event has been evaluating, the bookkeeper makes a journal entry in the general ledger to remove the old vehicle and associate accumulate depreciation and record. The purchase of the new vehicle with any applicable gains or losses on the transition.

The entire process of analyzing an event and recording the transaction in the accounting system is a good example of book-keeping. Many times accounting and book-keeping are using interchangeably, but this is incorrect. Accounting has a much more broad definition than simply recording transactions in an accounting system.

Accounting is using to identify events that need to record, recording the transactions of these events, and communicating. The effects of these transactions with people inside and outside of the company. As you can see, bookkeeping is only a small part of the broader definition of accounting.

#Importance of Bookkeeping!

Proper book-keeping gives companies a reliable measure of their performance. It also provides information on general strategic decisions and a benchmark for its revenue and income goals. In short, once a business is up and running, spending extra time and money on maintaining proper records is critical.

Many small companies don’t actually hire full-time accountants to work for them because the costs are usually higher. Instead, small companies generally hire a bookkeeper or outsource the job to a professional firm. One important thing to note here is that many people who intend to start a new business sometimes overlook. The importance of trivial matters such as keeping records of every penny spent.

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What is Bookkeeping Meaning and Definition - ilearnlot

Reference

1. What is it? History – //en.wikipedia.org/wiki/Bookkeeping
2. Meaning, Importance – //www.myaccountingcourse.com/accounting-dictionary/bookkeeping
3. Definition, Example – //corporatefinanceinstitute.com/resources/knowledge/accounting/bookkeeping/
4. Photo Credit URL – //www.apatax.ca/wp-content/uploads/2017/11/accounting-and-bookkeeping-firm-surrey.jpg


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