What is bookkeeping?
Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation.
What bookkeeping does?
Bookkeeping provides the information from which accounts are prepared. It is a distinct process, that occurs within the broader scope of accounting.
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Each transaction, whether it is a question of purchase or sale, must be recorded. There are usually set structures in place for bookkeeping that are called ‘quality controls’, which help ensure timely and accurate records
What is double entry bookkeeping?
The double entry system of bookkeeping is based on the fact that every transaction has two parts, which therefore affects two ledger accounts.
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Every transaction involves a debit entry in one account and a credit entry in another account. This serves as a kind of error-detection system: if, at any point, the sum of debits does not equal the corresponding sum of credits, then an error has occurred.
Why bookkeeping matters?
While it may seem obvious, detailed, thorough bookkeeping is crucial for businesses of all sizes. Seemingly straightforward, bookkeeping quickly becomes more complex with the introduction of tax, assets, loans, and investments.
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Tracking the financial activities of a business is the truest purpose of bookkeeping, meaning it allows you to keep an up-to-date record of the current incoming and outgoing amounts, amounts owed by customers and by the business, and more.