Bookkeeping system

The part of accounting that is concerned with recording data is often known as bookkeeping.
Until about one hundred years ago all accounting data was recorded manually in books, hence
the term ‘bookkeeping’. Nowadays, although handwritten books may be used (particularly by
smaller organizations), most accounting data is recorded electronically and stored electronically
using computers. Bookkeeping is the process of recording data relating to accounting
transactions in the accounting books.

Bookkeeping is any process of keeping the records of financial transactions of the business.
Fundamentally, it’s keeping track of all items dealing with finances – cash transactions, sales,
purchases, among others – on day to day basis. The one who ensures that all entries are recorded
chronologically is the bookkeeper.

Bookkeeping is the recording of financial transactions. Transactions include sales, purchases,

income, and payments by an individual or organization. Bookkeeping is usually performed by a
bookkeeper. The accounting process is usually performed by an accountant. The accountant
creates reports from the recorded financial transactions recorded by the bookkeeper and files
forms with government agencies. There are some common methods of bookkeeping such as
the Single-entry bookkeeping system and the Double-entry bookkeeping system. But while these
systems may be seen as "real" bookkeeping, any process that involves the recording of financial
transactions is a bookkeeping process.

Most people look at bookkeeping as a job that must be done to simply get back some much
needed cash at the end of the year. With this perspective, it is no wonder so many businesses fail
from the gate.

Two common bookkeeping systems used by businesses and other organizations are the single-
entry bookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping
uses only income and expense accounts, recorded primarily in a revenue and expense journal.
Single-entry bookkeeping is adequate for many small businesses. Double-entry bookkeeping
requires posting (recording) each transaction twice, using debits and credits.

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Importance of maintaining bookkeeping system for small and medium scale business

Bookkeeping is an important for all small and large business. The significance of bookkeeping
should not be underestimated, and paying concentration to books is a sure fire way to maximize
benefits, avoid severe mistakes and earn back cash on taxes. Bookkeeping after that is one of
those savings of time that will earn back sufficient money to ensure they are worth the time put
in.  Bookkeeping is the process of recording your company’s financial transactions and is the
first basic step of the accounting process.

At the same time though bookkeeping include other improvements from a business point of
view. It will allow the company to maintain records of their revenue and spending for their own
purpose - allowing them to look for tendency and create projections. For instance by analyzing
how revenue has gradually increase all the way through the year.

Small business bookkeeping can be the backbone of the business. As much as it seems to be a
laborious task for many, it will make or break your business. Keeping accurate records,
especially for the first few years is what will create the wind in the sails of your business vessel.
The basic records that a small and medium scale and business should have:

 A record of all the sales, with copies of any invoices the business have issued.
 A record of all the business purchases and expenses.
 Invoices for all the business purchases and expenses.
 Details of any amounts that the owner personally pays into or takes from the business.
 Copies of business bank statements.

The basic records mentioned above helps to create a profit and loss account which shows the
sales income that the business have received and the expenses the business have paid, and what
profit and loss the business have actually made.

All businesses are different and there are many specific types of detailed records that may need
to be kept. Some examples of records the business should keep include:

 Cash book.
 Petty cash book.
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  Order notes and invoices.
 Copy sales invoices.
 Details of any other business income received.
 Details of any private money brought into the business.
 Till rolls or other form of electronic record of sales.
 Details of any other income.
 Any cash taken out of the till to pay small business expenses.
 Bills and invoices for purchases and expenses.
 A record of stock on hand at the end of the year.
 All bank and building society statements pass books, cheque stubs and paying-in slips
which include details of business transactions.

If the business does not keep accurate and complete records the business may end up in paying
more tax. It is typical for small and medium business entrepreneurs to take care of the
bookkeeping by themselves.  Here are some of the reasons why bookkeeping needs to be given
top priority in business operation:

 A detailed and correct book of accounts is important when the business resort to outside
financing. This is the instrument for business to determine how much risk they are
dealing with. They need this data before releasing the amount.
 Financial statements is a must for it shows where the business stands. An accountant
takes care of this. He gets his information from the records prepared and submitted by the
bookkeeper. The accountant analyzes the records and from there, he comes up with the
financial statement.
 An accurate book of accounts will help the entrepreneur see where the business is and
where it is going in the next several years. The financial report aids in keeping in line
with the budget, analyzing the gross income, determining the health of the business and
anticipating cash flow issues.

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Difficulties face by the entrepreneur when developing bookkeeping system

An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes

significant accountability for the inherent risks and the outcome. Entrepreneurs choose a level of
personal, professional or financial risk to pursue opportunity. Entrepreneurs tend to identify a
market opportunity and exploit it by organizing their resources effectively to accomplish an
outcome that changes existing interactions within a given sector. The entrepreneur is the main
person behind a firm; she or he can demonstrate her or his quality as a leader by choosing the
right managers for the firm.

By having the bookkeeping system, small and medium scale business faced so many problems.
Each and every day they have to enter their financial transaction according to find the profit and
loss of the business. If they miss to enter even a single data the total account will be collapsed.
This may make them a great loss in the business. And also the bookkeeper should be more
trustworthy.

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