What is Bookkeeping?

Few have probably ever heard of Fra Luca Pacioli, the inventor of double-entry bookkeeping; but he has probably had much more influence on human life than has Dante or Michelangelo. - Herbert J. Muller

Since the business industry is mainly focusing on numbers and profits, there is an essential requirement for keeping a detailed record of all transactions and dealings.

Recording financial transactions is a very crucial aspect of businesses, be it a small company or a large firm. It is useful for determining where the company stands financially. Professionals who carry out these procedures are referred to as bookkeepers.

Bookkeeping is a task that relates to creating and maintaining a detailed record of all transactions which include finances. This procedure is to be carried out by all companies, whether a small firm or a large organization. The transactions usually comprise sales, purchases, due payments, earnings, etc.

Some people might think this is the same as accounting. However, both are slightly different in the method of operation. Bookkeeping is a primary task and pertains to taking direct information and details from the transactions conducted. On the other hand, accounting is concerned with referring to bookkeeping records and then preparing reports accordingly.

Typically, there are two fundamental methods used in the process of bookkeeping viz., single-entry system and double-entry system.

The single-entry system is a method of bookkeeping wherein simple and uncomplicated transactions are maintained in the books. This method is largely used by companies on a small scale.

Financial records associated with cash, accounts receivable, accounts payable, and taxes are generally created in a single-entry system. Other details such as inventory, assets and property, aggregate revenue, and expenditure are not recorded in financial books.

In a double-entry system, after every transaction, changes are made in a minimum of two accounts. In this system, both debit and credit accounts are maintained; which helps the company to find out any errors in calculations.

If the debit amount does not match the credit amount, a transaction has been missed. This necessarily does not mean there cannot be errors in the books even if the debit and credit amount matches. Standard books in a double-entry system include daybooks, journals, ledgers, and petty cash book.

The job description includes most of the single and double-entry tasks. A bookkeeper has to collect all the information and use it for preparing statistical reports for financial management of the company. This professional can even be asked to oversee the functioning of accounting and payroll practices.

For those thinking how to become a bookkeeper, you need to have an educational background in math, banking, and finance. You can either opt for a diploma or an associate degree in any field related to bookkeeping. After obtaining relevant education qualification, you can look forward to work as a bookkeeper.

To become a certified bookkeeper, you will need to show a work experience of two years in the field. Remember that the salary range for a job as a bookkeeper depends a lot on the certification. Other skills required are logical thinking, good communication, and a liking to work with figures and numbers.

Note that bookkeeper duties may vary from company to company and the practices adopted. Bookkeeping is definitely very significant for a business to realize its income over expenditure.