Acquainting One With Different Bookkeeping Systems}

Acquainting One with Different Bookkeeping Systems

by

vks

Recording, classifying and summarizing data in terms of money transactions both ways and also the various events that are of a financial character, and finally interpreting the results thereof is called bookkeeping. Bookkeeping or accounting is really called an art of correctly recording the day to day business and financial transactions. The process strives to keep the business records in an accurate and more systematic manner. This way, one will get to know the business results with minimum hassles or trouble. Therefore, it is understood to be some sort of a statistical procedure that includes the collection, classification and summarization of relevant and pertinent financial information of an organization or business. Businesses do maintain some kind of records to keep a tag on their income and expenditure.

The main objectives of accounting and bookkeeping are two-fold. One is to record permanently all the details that are in some way connected to these business transactions. The other is to show the effect of each and every transaction along with the combined effect of all such financial transactions during a given period. This act will help one find out the exact amount of profit a business has earned or the level of loss incurred. It also helps one to know the correct financial position of a business on a particular date. The necessity and importance of bookkeeping can be understood by finding answers to the questions including the amount a company has earned in a particular year and the previous year, whether the business is improving, the amount of cash at present, the amount owed by a company and things like that.There are various practices and systems of bookkeeping for maintaining business accounting records. In one system called the cash system of accounting, the system records only the various cash receipts and payments. This is based on the assumption that there are no credit transactions. If there happens to be any kind of credit transactions, they do not get recorded until the cash is finally paid or received. Receipt and payment accounts of various kinds of clubs, societies, hospitals, educational institutions and lawyers constitute some of the best examples of cash system. In the single entry system, the two fold aspect of each transaction as considered in double entry practice or system is ignored. When it comes to single entry system, purely the personal aspects of transaction called the personal accounts are recorded. This particular method does not take into consideration the impersonal aspects of the transactions other than the cash aspect. The accuracy of the posting and the safeguards taken against fraud may be compromised since it does not provide any sort of reins while recording cash transactions. Therefore, it is called by many as an imperfect accounting practice. The double entry system recognizes the two fold aspect of each and every business transaction. The questions or apprehensions are of decisive importance for a trader and the answers can only be drawn from up to date and properly kept financial records.

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Acquainting One with Different Bookkeeping Systems}