Bookkeeping is the art of recording business transactions in a systematic manner. However, bookkeeping has been defined in various ways by different authors. Some of the major definitions are given below: In simplified words, bookkeeping is the art of recording business transactions comprehensively and in a prescribed, careful way in the books of accounts. This is an important question that deserves a basic but important answer. Bookkeeping is the process of correctly recording cash, credit, and other transactions in the books of account. The primary book of account is called the ledger. It is known as the ledger because all transactions, after first being recorded in subsidiary books, are afterward grouped or summarized in the form of accounts in the ledger. Almost all business dealings are conducted on a credit basis to avoid the inconvenience and danger of carrying large amounts of cash. The supplier of goods or services is usually satisfied to receive payment at some further date. The main exception is the real trade for a private individual. Even in the smallest business, the proprietor or manager will want to have accurate and up-to-date information about how much has been brought and sold, how much money has been received for sales, and how much has been paid away for purchases. Private individuals often find it convenient to have the same information for their cash receipts and payments. You can imagine that with a very large business, chaos would quickly result without this information. It is reasonable to say that bookkeeping involves recording transactions so as to permit analysis in a systematic fashion, in a way that can be applied to all businesses of whatever kind, and that is intelligible not only now but at any future time. The term "books of account" has a distinctly old-fashioned sound. It perhaps makes you think of a Charles Dickens novel set in early Victorian England, with rows of clerks perched on high stools writing in large books. Bookkeeping today is likely to be done with the aid of a computer rather than with handwritten books, and this is a virtual certainty in a business of any size or significance. Nevertheless, modern bookkeepers are doing exactly the same as the clerks were in the novels of Charles Dickens. Today we are doing it faster and more accurately, but the Victorian clerks achieved very high standards. Whether or not they were any happier is a question for another book! All businesses, without exception, need to keep accurate and readily accessible records of their financial transactions. As a child, I had a neighbor who died at the age of 75, leaving records that accounted for every penny of their income and expenditures since their 21st birthday. Surprisingly, he was a charming, generous man and in no way a miser. Perhaps you too have a personal bookkeeping system to record your own financial affairs, though I would not recommend taking it to these extreme lengths. The benefits of dependable financial records in business are probably self-evident. They include:Bookkeeping: Definition
Bookkeeping: Explanation
What Is Bookkeeping?
What Are Books of Account?
Why Are Goods/Services Bought or Sold on Credit?
Why Record These Transactions?
Does Bookkeeping Really Involve Analyzing Transactions?
How Has Bookkeeping Changed?
Importance of Bookkeeping
Bookkeeping FAQs
It is reasonable to say that Bookkeeping involves recording transactions so as to permit analysis in a systematic fashion, in a way that can be applied to all businesses of whatever kind, and that is intelligible not only now but at any future time.
The term “books of account” has a distinctly old-fashioned sound. It perhaps makes you think of a charles dickens novel set in early victorian england, with rows of clerks perched on high stools writing in large books.
Today we are doing it faster and more accurately, but the victorian clerks achieved very high standards. Whether or not they were any happier is a question for another book!
All businesses, without exception, need to keep accurate and readily accessible records of their financial transactions.
The law requires all companies, as well as many other organizations, to prepare accounts satisfying certain criteria. This can only be done if the basic, supporting financial records are in place.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
