{"id":22639,"date":"2021-03-26T14:57:10","date_gmt":"2021-03-26T09:27:10","guid":{"rendered":"https:\/\/www.techjockey.com\/blog\/?p=22639"},"modified":"2023-11-02T20:02:37","modified_gmt":"2023-11-02T14:32:37","slug":"what-is-bookkeeping","status":"publish","type":"post","link":"https:\/\/www.techjockey.com\/blog\/what-is-bookkeeping","title":{"rendered":"What is Bookkeeping? Types, Benefits & Examples"},"content":{"rendered":"\n

Your business is involved in numerous financial transactions on a daily basis, which might need to be furnished to the authorities at the end of each financial year (or any other relevant period). Be it small or big, each organisation needs to have bookkeeping software to record transactions without any hassle automatically.<\/p>\n\n\n\n

<\/span>What do you mean by Bookkeeping?<\/span><\/h2>\n\n\n\n

Bookkeeping is the process of recording each financial transaction made by an organisation right from when it started till the time it closes the shop. Each record of a financial transaction is supplemented with the help of evidence. Evidence can include invoices, bills, purchase order, etc., which can prove that the transaction took place.<\/p>\n\n\n\n

<\/span>What is the difference between bookkeeping and accounting?<\/span><\/h2>\n\n\n\n
Parameters <\/strong> <\/td>Bookkeeping <\/strong> <\/td>Accounting <\/strong> <\/td><\/tr>
Usage<\/strong><\/td>Recording financial transactions.  <\/td>Summarizing financial transactions as part of ledger account.<\/td><\/tr>
Contribution to financial decisions<\/strong><\/td>Management cannot take business decisions solely with the help of bookkeeping tool.<\/td>Accounting is at the heart of all critical financial decisions.<\/td><\/tr>
Financial statements<\/strong><\/td>Bookkeeping does not involve preparing financial statements.<\/td>The process of accounting involves preparing financial statements.<\/td><\/tr>
Level of analysis<\/strong><\/td>It involves minimum or no analysis.<\/td>Accounting uses information recorded by bookkeepers for creation of financial reports.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Bookkeeping and accounting are used interchangeably but are slightly different from each other. Bookkeeping is an essential part of the accounting process.<\/p>\n\n\n

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\"difference<\/figure><\/div>\n\n\n

The bookkeeper would collect each transaction’s evidence, make an official entry in the accounting journal and enter the transaction either in one or more debits and credits.<\/p>\n\n\n\n

At the end of each financial year, the accountant will analyse these books to verify whether they are correct or not. In case of any discrepancy, the accountant would go over all the evidence once again to settle the books.<\/p>\n\n\n\n

<\/span>Types of bookkeeping<\/span><\/h2>\n\n\n\n

There are two types of bookkeeping methods you can choose from. They are :<\/p>\n\n\n\n

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  1. Single-entry bookkeeping<\/a><\/li>\n\n\n\n
  2. Double-entry bookkeeping<\/a><\/li>\n<\/ol>\n\n\n
    \n
    \"Types<\/figure><\/div>\n\n\n

    <\/span>Single-Entry Bookkeeping<\/span><\/h3>\n\n\n\n

    Single-entry bookkeeping can be understood as maintaining a cheque register. You make an entry as soon as a transaction is completed. This method is generally preferred by those companies that make use of cash basis accounting over accrual accounting.<\/p>\n\n\n\n

    Advantages of Single-Entry Bookkeeping<\/strong><\/p>\n\n\n\n