Glossary
/

Book Keeping

What is Bookkeeping?

Bookkeeping stands as a fundamental pillar for businesses of all sizes, essential for the meticulous management and decision-making process regarding financial activities. It involves the detailed recording, organizing, and maintaining of a company's financial transactions, providing a clear and accurate depiction of its financial health.

Core Principles of Bookkeeping

Double-Entry Accounting: This principle mandates that every financial transaction affects two accounts: one is debited, and the other is credited. This method ensures that the accounting equation remains balanced, providing a more comprehensive view of the financial transactions.

Chart of Accounts: A categorized list of all accounts used in the business's ledger, detailing assets, liabilities, equity, income, and expenses. This organizational tool is crucial for bookkeepers in tracking financial activities systematically.

Journal Entries: The foundational step in recording business transactions. Each entry logs the date, the accounts involved, and the amounts, ensuring a chronological account of financial events that lead to the compilation of the general ledger.

Essential Bookkeeping Best Practices

Financial Statement Preparation: Bookkeepers compile critical financial documents, such as the balance sheet, income statement, and cash flow statement, to outline the company's financial status to stakeholders.

Bank Reconciliation: This process involves aligning the company's recorded transactions with those listed in the bank statement, identifying and rectifying discrepancies to maintain accurate financial records.

Accounts Receivable and Payable Management: Efficient management of funds owed by customers and to suppliers is vital for sustaining healthy cash flow and financial stability.

Inventory Management: Accurate tracking and valuation of inventory ensure that the business can meet customer demand and accurately report financial standings.