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Bookkeeping and Accounting

Bookkeeping and Accounting

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Published by Giico Borja

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Published by: Giico Borja on Jun 21, 2011
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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.Bookkeeping should not be confused with accounting. The accounting process is usually performed byan accountant. The accountant creates reports from the recorded financial transactions recorded by thebookkeeper 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.
Accounting
is defined by the American Institute of Certified Public Accountants (AICPA) as "the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions andevents which are, in part at least, of financial character, and interpreting the results thereof.
 
Distinction of bookkeeping and accounting
Bookkeepers are responsible for maintaining the "business checkbook", much like apersonal checkbook. They record routine money transactions like customer payments into a"cash receipts journal" and checks to vendors into a "cash disbursement journal." They alsoprocess payroll. At month end they transfer or "post" the "journal" totals to the "generalledger" in preparation for financial statements prepared by the accountant.Accountants are responsible for the design and management of the financial systems thatbookkeepers use. They prepare monthly financial statements and tax returns at year end.Accountants may also prepare budgets for management and loan proposals for bankers;and perform cost analysis for the company's products or services.Bookkeeping is procedural and is largely concerned with development and maintenance of accounting records.it is the "how" of accounting.Accounting is conceptual.it is concerned with the "why", reason or justification for any action adopted.
Bookkeeping systems
Two common bookkeeping systems used by businesses and other organizations are the single-entrybookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping uses onlyincome and expense accounts, recorded primarily in a revenue and expense journal. Single-entrybookkeeping is adequate for many small businesses. Double-entry bookkeeping requires posting(recording) each transaction twice, using debits and credits.
Single-entry system
The primary bookkeeping record in single-entry bookkeeping is the cash book, which is similar to achecking (cheque) account register but allocates the income and expenses to various income andexpense accounts. Separate account records are maintained for petty cash, accounts payable andreceivable, and other relevant transactions such as inventory and travel expenses. These days, singleentry bookkeeping can be done with DIY bookkeeping software to speed up manual calculations.

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