Skip to main content

Elements of Book-keeping



Bookkeeping is a task concerned with the recording of financial data relating to business operations in a significant and orderly manner. It envelopes all the procedural aspects of accounting work and embraces record-keeping function. In this article, we have discussed the list elements of bookkeeping and instance of entries which becomes part of bookkeeping.

Bookkeeping procedures are governed by the end product, the financial statements. And ‘financial statements’ includes Profit and Loss Account and Balance Sheet including Schedules and Notes forming part of Accounts.

Elements of Bookkeeping

Elements of Bookkeeping

Journals

In the system of Bookkeeping, the journals are the first place you can look to find complete information about a transaction. The general journal, used by many businesses that employ a double-entry accounting system, records the debit and credit amounts for each account as transactions occur. It may also list a short description of the transaction. For example, some businesses may have specialized journals, each for recording a specific kind of transaction depending on their needs

Ledgers

Ledgers group transactions according to account and the effect it has on the business. Such grouping or categories in the ledger may include assets, liabilities, expenses and revenue. Transactions from business journals get posted or recorded to the ledgers periodically. And with the help of ledgers, the financial position of the business can be easily ascertained as well.

Financial statements

They communicate the essential information about the financial situation of a company to outside parties. Most bookkeeping systems use four major financial statements.

  • Balance sheet: - It gives a description of a company's financial position for a particular date, by listing details of its assets, liabilities and shareholder's equity.
  • Income Statement: - It displays the businesses net earnings for a specific period.
  • Cash flow statement: - It picturizes the increases and decreases in cash for a period as it relates to business operations, investment and financing activities of a business.
  • Statement of shareholders: - It displays the changes in the company's retained earnings, by listing items like net income for the year and dividends paid to shareholders.

What kind of entries does find its place in Bookkeeping?

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

Any transaction, whether it is a question of purchase or sale, must be recorded. And the person(s) responsible for bookkeeping for business would record all transactions that are related. The following are some examples of entries which forms part of bookkeeping.

  • Expense payments to suppliers
  • Loan payments
  • Customer payments for invoices
  • Monitoring asset depreciation and booking adjustments
  • And so on….

Comments

Popular posts from this blog

What are the Key Reports a Business Owner Must Track and Which is the Best Tool for it?

As a business owner, you must be already keeping a track of the overall financial health of the business. While you may hire an accountant for end-to-end tasks that will keep your books of accounts updated, it is imperative that as a business owner, you also go beyond the basic understanding of key financial reports to take your business to the next level. The three primary key aspects which would help you as a business owner to get a holistic view of your company’s books of accounts in sync with your business transactions are; Cash Stock and Taxation Cash What is the ultimate goal of any business? To have regular cash flow, right? So, where do we get these crucial insights about cash flow management in order to stay updated with your company’s finances from? Let’s take a look at how these cash flow reports will help you build your business and trigger long term, growth. Cash Flow Cash flow is the amount of money going in and out of your business. Healthy cash flow can help lead your b...

Break Even Point: Definition, Formula, Example and Analysis

What is the Break-Even Point? A simple financial tool which helps you determine at what stage your company, or a new service or a product, will be profitable. To put simply, break-even point analysis will tell you the number of products or services a company should sell to cover its costs, particularly fixed costs. Break-even is a situation where you are neither making money nor losing money, but all your costs have been covered. Break-even analysis is useful in studying the relation between the variable cost, fixed cost and revenue. Generally, a company with low fixed costs will have a low break-even point of sale. For example, a company has a fixed cost of Rs.0 (zero) will automatically have broken even upon the first sale of its product. The purpose of the break-even analysis formula is to calculate the amount of sales that equates revenues to expenses and the amount of excess revenues, also known as profits, after the fixed and variable costs are met. The main thing to understand i...

6 Tips for Efficient Cash Flow Management

By definition, cash flow refers to the amount of money flowing in and out of the business. The larger the time gap between cash outflow (payments to your supplier, employees, duties etc.) and cash inflow (receipts from your customers), the higher the risk it possesses to the business. These situations persist in every business and to smoothly manage such situations, you need cash flow management. In simple words, cash flow management largely implies managing frequency of payments and a whole lot of activities to encourage your customers to pay as fast as possible. Cash flow management involves a process of preparing cash flow statement, monitoring, analysing and optimizing such that business has enough cash cushion to run their business. In this article’ Tips to Efficient Cash Flow Management’, we are sharing you some of the best ways to manage optimum cash flow in your business. Here are 6 quick tips to manage your cash flow efficiently. Faster realisation of accounts receivables Acco...