Basic Bookkeeping

J. R. Baltiboi has observed that Bookkeeping is the art of recording business dealings in a set of books. Bookkeeping is the science and art of systematically recording, classifying and summarizing the financial transactions or events of a business in a set of books. A business transaction means the exchange of money or items of value between two or more persons. Anytime this occurs, bookkeeping comes into play.

It has been noted that the process of accounting begins as the business transaction occurs. Once a business transaction takes place it is recorded in the books of accounts. This process starts with recording transactions in the primary-entry cash book, bank book, sales book, purchase book, debit note/credit notebook and journal. These are regarded as the books of primary entry where transactions are first recorded.

Transactions are then posted to the ledger account. This is called the ledger posting. The balancing of each ledger account is done at periodic intervals which cannot be longer than one year. Many organizations do it on a monthly, quarterly or half-yearly basis.

The trial balance is prepared from the ledger balances. In this statement, the totals of debits and credits must agree with each other. This is the test of arithmetical accuracy of recording, posting and totaling. The debits and credits must tally.

Many necessary adjustments and provisions are made to ensure that accounting is done in conformity with the Generally Accepted Accounting Principles (G A A P). These rules and regulations are universally adopted by the accountants in recording accounting transactions.

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