IAB Level 1 Certificate in Book-Keeping

Bookkeeping and Its application in Business

It is the daily recording of financial transactions by a bookkeeper which includes transactions like sales, purchases, income receipts and payments by an individual or organization. There is a difference between bookkeeping and accounting since the process of accounting is performed by an accountant who creates reports from the recorded financial transactions that the bookkeeper created at a given period of time.

In every business transaction a document is produced as a form of reference and evidence between the buyer and seller, sales and purchase usually have invoices or receipts, a deposit or withdrawal slip is usually created when a business transaction is done through banking. The process of bookkeeping initially begins with the recording of details of all daily transactions in journals, thereafter the information is transferred to ledger accounts, this process of transferring summaries or individual transactions to the ledger is called posting. Once the posting process is complete, accounts kept using the "T" format undergo balancing, which is simply a process of balancing the accounts. For example John wants to start a business and has deposit 1,000£ in the account of the business hence the transaction will have two entries:

1. Debiting the bank A/c ledger with 1,000£
2. Crediting the capital A/c ledger with 1,000£  

After completely balancing and posting all the daily financial transactions from the journals to the ledger accounts the bookkeeper transfers the total entries to the trail balance, therefore providing the accountant the opportunity to create an income statement and balance sheet using the information from the trail balance. The trial balance is a three column financial statement where:-

view more...

Related Topics

2.  Understanding Different Types of Business Organization.

3. Know the Terminology Used in Bookkeeping