Bookkeeping is the recording of the money values of the transactions of a business. Bookkeeping provides the information from which accounts are written but is a previous process, prior to accounting.

Essentially, bookkeeping records two types of information: (1) the current value, or equity, of the entity and (2) the changes in value—profit or loss—taking position in the business within a particular time.

Management officials, investors, and credit grantors all demand this kind of information: management in order to assess the upshots of operations, to control costs, to budget for the future, and to make financial policy decisions; investors to assess the results of business operations and make decisions for buying, holding, and selling securities; and credit grantors to judge the financial statements of an enterprise in finding whether to grant a loan.

Pieces of financial and numerical record charts are found for almost every group of people with a commercial background. Records of trading contracts were uncovered in the ruins of Babylon, and accounts for both farms and estates were held in ancient Greece and Rome. The dual-entry process of bookkeeping came with the development of the commercial republics of Italy, and tutorial manuals for bookkeeping were produced in the 15th century in some Italian cities.

During the late 18th and early 19th centuries, the Industrial Revolution permitted an important stimulus to accounting and bookkeeping.

The development of manufacturing, trading, shipping, and subsidiary services made correct financial recordkeeping a necessity. The ancestry of bookkeeping, in fact, reflects closely the past of commerce, industry, and government and, in some part, assisted to shape it. The international spread of industrial and commercial activity needed higher sophisticated decision-making methodology, which itself called for better sophistication in the selection, classification, and presentation of information, even more so with the aid of computers. Taxation and government legislation became more important and resulted in higher demand for information; business firms had to have information available to bolster their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also developed in size, and the demand for bookkeeping for their own departmental operations increased.

Although bookkeeping procedures can be rather detailed, all of it is based on two types of books employed in the bookkeeping process—journals and ledgers. A journal contains the daily transactions (sales, purchases, etcetera), and the ledger contains the record of individual accounts. The daily records in the journals are put in the ledgers.

At the end of each month, by general practice, an income statement and a balance sheet are constructed from the trial balance posted in the ledger. The point of the income statement or profit-and-loss statement is to present an analysis of any changes that took place in the business equity as a result of the events of the period. The balance sheet provides the financial position of the corporation at a particular date taken from assets, liabilities, and the ownership equity.

For information about MYOB bookkeeping brisbane or MYOB training brisbane, contact Stone Consulting. Stone Consulting also does bookkeeping in Redlands.

Sphere: Related Content