Bookkeeping is the recording of daily financial transactions, which is a significant part of the system of accounting in most companies and industry sectors. It involves preparing financial resource documents for company operations, processes, operations and many other occurrences of an organization. The ultimate objective of bookkeeping is to record financial transactions as they occur and provide interpretation for decision support.
A number of methods are available to record financial transactions such as the single-entry system or double-entry system. Single-entry bookkeeping system records financial transactions in single account. Under this method, the date and amount of each transaction is entered; however, since the data is not written in code, it is prone to errors. Double-entry bookkeeping system records each transaction twice; the first record is for the current transaction and the second is for the previous transaction that was debited or credited.
The single entry bookkeeping method makes use of certain computer software tools to record financial transactions and provides visual evidence for the recording and interpretation of data. The primary benefit of using this method is that the transactions are more easily recognized and may be immediately acted upon when required. Double-entry bookkeeping system makes use of bank reconciliation software to record financial transactions and use the cash basis method to record receivables. The software uses the debit and credit instruments to record financial transactions.
Bookkeeping and accounting clerks, along with auditors, keep track of all company transactions. They create records of transactions by creating a database that contains details about each transaction. The accounting clerks prepare reports from the database by interpreting and comparing the information contained in the entries made in the books. The data is stored in computers, which are controlled by the accounting clerks, keeping track of transactions.
Bookkeeping is divided into three basic forms: single entry bookkeeping, double entry bookkeeping, and tri-entry bookkeeping. Single entry bookkeeping records financial transactions in a paper form. The first journal page of every account is used to record the transaction that goes on with the account. In double entry bookkeeping, all debits and credits are entered twice, once in the debit section and once in the credit section. Credit and debit entries are recorded monthly and quarterly in tri-entry bookkeeping.
The role of bookkeepers and auditing clerks in keeping track of company financial records cannot be overemphasized. Without these professionals, accounts payable and accounts receivable would be difficult to manage. They ensure that the books are accurate and up-to-date at all times. They maintain communication lines with other departmental personnel, vendors, suppliers, and the general public. As such, bookkeepers and auditing clerks help in maintaining smooth relationship among all parties concerned.