Intro to Bookkeeping for Your Business

In the day to day running of any commercial enterprise …

 

In the day to day running of any commercial enterprise there will inevitably be a large number of financial transactions of various types happening on a daily basis. The importance of these transactions which will of course vary depending on the organization in question. Keeping track of all these transactions is important, particularly around tax season when every organization is expected to pay money into the government just the same as private citizens. Unlike private citizens though, businesses and non-profits typically bring in and spend money far more often.  As a result it becomes necessary to properly track the income and expenses of these groups closer, and file them away in a manner that’s easy to reference at a later date.

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Bookkeeper vs. Accountant

The process of recording the transactions of an organization, particularly an organization that takes in and sends out a large number of transactions on a frequent basis, is known as bookkeeping. While recording these transactions is a part of the accounting process for a business or non-profit organization, a bookkeeper is not necessarily the same as an accountant. While a bookkeeper can record this information, an accountant is required to properly prepare and organize the information for purposes ranging from applying for grants and subsidies to preparing statements for investors to, of course, preparing an organization’s income records for the ever dreadful yet absolutely necessary to society purpose of taxes.

Any process that involves recording financial transactions is a bookkeeping process, however, and most accountants can reasonably be expected to work as bookkeepers as well as accountants if it so comes to that. Still, a reasonably trained employee can also serve as a bookkeeper without full training as an actual accountant. A bookkeeper’s job is to record the daily financial transactions of a business, as well as collecting other records of the transactions afterwards, ranging from receipts to invoices to digital records showing the fuller depths of a business’s operating income and expenses. It is also the responsibility of a reasonably trained bookkeeper to ensure that all transactions are recorded in the proper place to ensure that each transaction is recorded in the right place.

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Daybook Defined

There are a number of places where these records are kept. On a daily level, these records are known as daybooks. There is the sales daybook, which is where a book keeper records sales invoices, usually on the spot sales made by an organization. The sales credit daybook is for sales made on credit, a book that is growing ever more important in an era of credit cards and other payment methods. On the other hand, the purchases daybook is where the bookkeeper records all the purchase invoices, where by the business records the expenses other businesses charge them for daily operations. The purchases debit daybook is where all the purchase debit notes are recorded, a complicated matter that all book keepers should be ready to handle. There is also the cash daybook, wherein all the money in the form of cash or similarly liquid assets are received and spent by a business, which may be split into two separate books, one for cash spent and one for cash received.

Of course, the records kept by a bookkeeper are basically just records, usually made on the spot and then recorded into the daybooks at the end of the business day or even an employee’s shift at the workplace. These records are considered the “trial balance stage” of an organization’s transaction records, usually spanning no more than a day or at most a week at a time. The trial balance stage is the first stage of the accounting process, where very little worthwhile information can be found easily, instead requiring a closer look to get a broader picture of the organization’s financial situation.

Income Statements and Balance Sheets

From there, the full depths of the assets transferred tends to call for a business owner or their accountant to actually prepare sound, financially coherent reports about the actual depths of the financial situation of an organization, whatever that situation may be.

From the trial balance stage, an accountant then takes the bookkeeper’s records and transforms them into income statements and balance sheets, both invaluable tools for keeping the full picture of a business visible to its owners and others.

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