Basic Accounting Books and Records

The article shows a detail understanding of Basic Accounting Books and Records Keeping.

Accounts:

A company’s ledgers, journal entries, and source documents are its accounting records. The accounting transactions of a corporation are listed in these records. You utilize accounting records to create financial statements. For a few years, keep them on file in case someone wants to review them.

Who will probably go at your accounting documents? auditors.

Maintaining accounting records also helps to guarantee that your financial statements are accurate. Records of assets and liabilities are two typical categories of accounting records. Checks, invoices, and other financial activities are also included. And lastly, there’s any other kind of money exchange.

Accounting records are key source of information and evidence to prepare, verify the financial statements. There are 3 rules:

• Debit
  the receiver, Credit the giver
• Debit
  what comes in, Credit what goes out
• Debit
  all expenses and losses, Credit all income and gains.

Basic Accounting Records and Books of Accounts

1. Double Entry System:

The double-entry system of accounting or bookkeeping means that for every business transaction, amounts must be recorded in a minimum of two accounts. The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.

2. Journal:

In accounting and bookkeeping, a journal is a record of financial transactions in order by date. Traditionally, a journal has been defined as the book of original entry. The definition was more appropriate when transactions were written in a journal prior to manually posting them to the accounts in the general ledger or subsidiary ledger.

Types of Journal in Accounting

• Purchase journal
• Sales journal
• Cash receipts journal
• Cash payment/disbursement journal
• Purchase return journal
• Sales return journal
• Journal proper/General journal

3. Ledger:

A ledger is the principal book or
computer file for recording and totaling economic transactions measured in
terms of a monetary unit of account by account type, with debits and credits in
separate columns and a beginning monetary balance and ending monetary balance
for each account.

4. Trial:

A trial balance is a list of all the general ledger accounts contained in the ledger of a business. This list will contain the name of each nominal ledger account and the value of that nominal ledger balance.

5. Balance, Cash Book:

In banking and accounting, the outstanding balance is the amount of money owed, that remains in a deposit account.

A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. Entries in the cash book are then posted into the general ledger.

6. Depreciation Accounting:

Depreciation is an accounting method
of allocating the cost of a tangible asset over its useful life and is used to
account for declines in value. Businesses depreciate long-term assets for both
tax and accounting purposes.

7. Final Accounts with Adjustments

Final account is a somewhat archaic bookkeeping term that refers to the final trial balance at the end of an accounting period from which the financial statements are derived.

8. Hotel Accounting:

Hotel accounting is part of accounting practice in hospitality industry. Unlike conventional corporate accounting where one set of financial statement is used, in hotel accounting financial reports are made from various department before “consolidated statements” are made for the hotel.

9. Financial management:

It is an ideal practice for controlling the financial activities of an organization such as procurement of funds, utilization of funds, accounting, payments, risk assessment and every other thing related to money.

10. Capital structure:

The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure.

11. Capital budgeting:

It is the planning process used to determine whether an organization’s long-term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm’s capitalization structure (debt, equity or retained earnings).

12. Internal financial control:

It is a process for assuring of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization. It is a means by which an organization’s resources are directed, monitored, and measured.