What is Bookkeeping?

Bookkeeping is the charting of the money values of the function of a business. Bookkeeping gives the figures from which accounts are prepared but is a distinct process, required prior to accounting.

Fundamentally, bookkeeping finds two kinds of information: (1) the current value, or equity, of an entity and (2) the changes in value—profit or loss—taking position in the enterprise over a given period of time.

Management officials, investors, and credit grantors all need this kind of information: management in order to analyse the results of operations, to control costs, to budget for the future, and to make financial policy decisions; investors to understand the upshot of business operations and make decisions regarding buying, holding, and selling securities; and credit grantors in order to analyze the financial statements of an enterprise in assessing whether to allow a loan.

Traces of financial and numerical charts can be seen for almost every country with a commercial backbone. Records of trade contracts were uncovered in the archaelogical digs of Babylon, and accounts for both farms and estates were made in ancient Greece and Rome. The dual-entry style of bookkeeping came up with the furthering of the enterprising republics of Italy, and tutorial manuals for bookkeeping were created during the 15th century in some Italian cities.

In the late 18th and early 19th centuries, the Industrial Revolution provided a significant stimulus to accounting and bookkeeping.

The development of manufacturing, trading, shipping, and subsidiary services made correct financial bookkeeping a necessity. The history of bookkeeping, in fact, reflects the ancestry of commerce, industry, and government and, in part, helped shaping it. The international expansion of industrial and commercial activity called for greater sophisticated decision-making methodology, which itself demanded higher sophistication in the selection, classification, and presentation of information, increasingly with the aid of computers. Taxation and government legislature became more important and resulted in even greater demand for information; enterprises had to have available information to go with their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also became sizeable, and the need for bookkeeping for departmental operations became higher.

Although bookkeeping procedures can be extremely multifaceted, all are based on two styles of books utilised in the bookkeeping procedure—journals and ledgers. A journal contains the daily transactions (sales, purchases, etcetera), and the ledger should have the records of individual accounts. The daily records from the journals are written in the ledgers.

At the end of each month, by general practice, an income statement and a balance sheet are prepared from the trial balance posted out of the ledger. The purpose of the income statement or profit-and-loss statement is to provide an analysis of any changes that have taken place in the business equity as a result of the operations of the period. The balance sheet displays the financial condition of the business at a particular point in time in terms of 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.