Bookkeeping is the recordkeeping of the money values of the function of a business. Bookkeeping provides the details from which accounts are made but is a separate process, preliminary to accounting.
Predominantly, bookkeeping provides two areas of information: (1) the current value, or equity, of the business and (2) the change in value—profit or loss—taking place in the entity within a particular period of time.
Management officials, investors, and credit grantors all require this information: management in order to interpret the outcomes of operations, to control costs, to budget for the future, and to make financial policy decisions; investors to analyse the outcome of business operations and make decisions about buying, holding, and selling securities; and credit grantors to judge the financial statements of an enterprise in finding whether to accept a loan.
Bits and pieces of financial and numerical recordkeeping are found for just about every state with a commercial background. Records of trading contracts have been discovered in the archaelogy of Babylon, and accounts for both farms and estates had been held in ancient Greece and Rome. The two-entry way of bookkeeping started with the development of the enterprising republics of Italy, and tutorial books for bookkeeping were created during the 15th century in several Italian cities.
Within the late 18th and early 19th centuries, the Industrial Revolution permitted a notable stimulus to accounting and bookkeeping.
The rise of manufacturing, trading, shipping, and subsidiary services made accurate financial recordkeeping a must-have. The history of bookkeeping, in fact, closely reflects the past of commerce, industry, and government and, in some part, assisted in shaping it. The global revolution of industrial and commercial activity required more sophisticated decision-making methodology, which in turn demanded higher sophistication in the selection, classification, and presentation of information, even more so with the assistance of computers. Taxation and government legislature became more important and resulted in higher requirement for information; business entities had to have available information to support their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also grew in size, and the demand for bookkeeping for their own inner departmental operations went up.
Although bookkeeping methodology can be very multifaceted, all are based on two styles of books employed in the bookkeeping procedure—journals and ledgers. A journal should have the daily transactions (sales, purchases, and such), and the ledger must have the information of individual accounts. The daily records kept in the journals are entered in the ledgers.
Each month, as a general rule, an income statement and a balance sheet are constructed from the trial balance posted from the ledger. The point of the income statement or profit-and-loss statement is to give an analysis of those changes that happen in the business equity resulting due to the operations of the period. The balance sheet gives the financial situation of the enterprise at any particular date with regard to 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