Thursday, January 27, 2011

Book Keeping a Basic Concept in Accounting

What is book keeping?
The process of recording business transactions in subsidiary books of accounts is referred to as book keeping. Business transaction includes sales, purchases, and collections from customers, and payments to suppliers. These transactions need to be recorded initially in preliminary books of accounts either in computerized or manual accounting mechanism. Though mainly characterized with smaller firms but in larger firms the whole accounting system is also based on book keeping. It forms the basis of single entry as well as double entry system. However small business usually rely on book keeping such as daily recording and updating the transactions whereas larger firms mechanically handle the book keeping system which ultimately forms the accounting system.
Difference between Book Keeper and Accountant
Book keeper is the person responsible to record the transactions as they occurred. He / She also some times refer to as Accounting Technician or Accounting Clerk. Though not highly qualified in the field of accountancy but requires being capable of having basic knowledge of accounting concepts for accurate recording and classification of accounting transactions. Book keeper’s job is usually limited to up to the trail balance in case of double entry system. The Accountant on the other hand is liable to prepare financial statements from the information the book keeper or accounting clerk has recorded and assimilated. However in many organizations both the individuals are usually labeled as accountant.
Single entry and double entry book keeping
As both double entry and single entry systems are fundamentally based
on book keeping but single entry book keeping remains limited to the smaller firms or businesses usually sole proprietorship. Small entrepreneurs sometimes hire part time book keeper to record daily transactions in the evening and update the records. In bigger organizations single entry book keeping can not be declared acquainted with the requirements of large volume of transactions and becomes insufficient. Therefore double entry book keeping system is implemented for systematic gathering, classification, and recording of the business transactions.  

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