A company normally makes a lot of purchases. It needs to keep track its flow of money. The responsibility of documenting these important transactions goes to the bookkeeper.
Bookkeeping is the activity of recording all the financial transactions performed and done by the company. Bookkeeping is not limited only to companies and corporations, though. Organizations such as club or even single individuals also do bookkeeping. Financial transactions are defined as all occasions that entail money.
In bookkeeping, certain people keep records of what the company sold, bought, owed, and owned. The monitoring of the money that the company receives, the money that the company releases and the money that is left with the company falls under a bookkeeper’s responsibility.
For individual and family bookkeeping, the process is a lot simpler. However, it still follows the same principle. Bookkeeping of this kind engages in monitoring and keeping track of the net income of the household or individual, checking the account register or the savings account passbook. Also, individuals who do business by borrowing or lending money also use bookkeeping to track how much they owe to other people or how much money they should collect from others.
In the past, bookkeeping is done by using a paper ledger, a pen, or a pencil. However, due to the increasing complexity of tax regulations, the likelihood of committing calculation errors and the desire for efficient office organization, most companies, organizations, groups and individuals use accounting software to make this task easier.
Businesses and organizations use either of two common bookkeeping method—single-entry and double-entry. The single-entry bookkeeping system indicates income and expense accounts only, mainly recorded in a revenue and expense journal or ledger. This kind of bookkeeping is ideal and sufficient for small businesses and for individuals.
Double-entry bookkeeping, on the other hand, needs posting or recording each transaction twice. This bookkeeping system uses debits and credits.
For businesses or organizations, a bookkeeper is hired to facilitate this task. She is responsible for writing up the daybook of a company. She ensures that the daybook states the purchase, sales, receipts and payments. She ensures that all the transactions are placed in the correct daybooks and ledgers. These records are then submitted to an accountant who, in turn, will prepare profit and loss statements and balance sheet using the bookkeeper’s records.
Bookkeeping, therefore, is quite essential to the day-to-day operations of a company.