Most people are involved in some sort of bookkeeping, whether for their personal use or for their organization, yet there are many misunderstandings about what bookkeeping actually is.
Many San Diego accountants believe that their clients should be educated on bookkeeping in general, so that they can have better understanding of why they do things and what the finances of their own business need to do.
Bookkeeping is the recording of all financial transactions undertaken by an individual or organization. The organization may be a business, a charitable organization or even a local sports club. A financial transaction is any event that involves the exchange of money.
In short, bookkeeping is “keeping records of what is bought, sold, owed, and owned; what money comes in, what goes out, and what is left.”
The name comes from the fact that financial information used to be recorded using pen and ink in paper books – hence “bookkeeping.” However, these days it is more commonly recorded in a computer system.
Individual and family bookkeeping involves keeping track of income and expenses in a cash account record, bank account statements, credit card statements, or savings account passbook. Individuals who borrow or lend out money also track how much they owe or are owed from others.
Two most common bookkeeping methods used are the single-entry bookkeeping system and the double-entry bookkeeping system:
- Single-entry bookkeeping uses only income and expense accounts. Its is a simple method of bookkeeping relying on a one sided accounting entry to maintain financial information.
- Double-entry bookkeeping requires recording each transaction twice, as debits and credits. It is a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different nominal ledger accounts.
While many companies outsource their bookkeeping to accountants, bookkeeping San Diego specialists agree that any individual or organization involved in bookkeeping should be aware of the process and what goes into it. A more informed client can assure that his or her accounting services are the most appropriate for their needs.