Bookkeeping in Accounting

Bookkeeping

What is Bookkeeping?

Bookkeeping is the systematic recording of financial transactions and data regularly.

It ensure that the records of each financial transactions are up-to-date (updated) and correct for easy understanding.

• Relationship of Bookkeeping and Accounting

1. Bookkeeping is one separate part of Accounting which the Accountants use to prepare financial accounts and statements.
2. Accounting relies on the information provided by the bookkeepers to prepare a financial report. If the bookkeeping is appropriate the account will be accurate.
3. Accountants perform more critical tasks than bookkeepers. And spend more time than the bookkeepers, but sometimes bookkeepers do accountants works, such as preparing tax return and payrolls.

Objectives of Bookkeeping

1. It summarize transaction.

   Bookkeeping helps to summarize huge amount of financial data in a systematic and chronological order.

2. It provide financial information.

Bookkeeping is prepared to provide financial information to the management and shareholders in order to make future plans.

3. To collect financial data for accountants

Accounting is prepared after gathering data by bookkeepers. The bookkeeping organize data which make accounting easier and less time consuming to prapare.

4. To eliminate errors

The bookkeeping is a systematic record of transactions. So, errors are detected and eliminated in the process of keeping the records.

5. To provide Relevant and essential financial data

Bookkeeping is used to capture just the information that accounting is related and concerned with.

Types of Bookkeeping

We have two (2) types of Bookkeeping:

1. Single-entry bookkeeping.
2. Double-entry bookkeeping
We will discuss much on Single and Double-entry bookkeeping in our upcoming topics

Importance of Bookkeeping

• It is easier to plan.

The management use the bookkeeping records to predict and plan ahead for the future.

• It provide detailed and relevant information.
• It enable business to respond in time

With bookkeeping records, a business could be able to respond at anytime since the records are kept regularly.

• It provide faster financial analysis.

Bookkeeping is less expensive than accounting, thus, by having a detailed bookkeeping, it may shorten the time an an accountant may spend preparing financial statement.

• Easy to audit.

If bookkeeping is clearly prepared with details, the auditor will get it easy to compare the bookkeeping and the financial statement to provide quick report.