What Is Bookkeeping in Accounting
Bookkeeping in accounting is known as the recording of different financial transactions both debit and credit. It is a major part of accounting in every business. Different transactions that are recorded include purchases made by an organization, sales transactions, payments made and received by a person or a corporation.
Bookkeeping can also be defined as a process in accounting that involves the preparation of documents for every kind of transactions and business operations. These transactions are recorded and secured for future reference and many other purposes.
Bookkeeping should be done accurately as financial transactions are the bedrock of every business establishment. Bookkeeping is important to different external users such as financial institutions, investors, even the government. This is necessary as they need to have access to reliable and trusted information if they are to make better and quality lending decisions and investment. The whole economy of a country depends on proper and accurate bookkeeping for users-internal and external.
Importance of Bookkeeping to a Firm
- Proper and accurate recording of financial transactions gives a business firm a reliable and trusted measure of their performance.
- Bookkeeping is used to provide detailed information on the general transaction and strategic decisions.
- Proper recording of all financial transactions in a company is a benchmark for the company’s revenue and income goals.
- From the information gotten from bookkeeping, a company will know the best time to invest, purchase, sale or not. This is important so extra spending of the company’s money and time on maintaining accurate records is critical.
- Many small business establishments prefer to work with a bookkeeper than employ the services of a full-time accountant because the accountant costs are always higher.
Bookkeeping involves different standard methods such as the single-entry bookkeeping system and the double-entry bookkeeping system. The aforementioned standard methods of bookkeeping may be taken as “real” bookkeeping, while every other process that involves the financial recording of transactions is a bookkeeping process.
Who is a Bookkeeper
A bookkeeper is one in charge of bookkeeping. A bookkeeper is anyone who records the daily financial transactions of a company or organization. Bookkeepers always write the daybooks which contain different records of purchases, receipts, payments, and sales of an organization. The work of a bookkeeper does not end here, a bookkeeper also documents the aforementioned financial transaction be it credit, debit or cash into the correct daybook.
A daybook can be a customer ledger, petty cash book, suppliers ledger and the general ledger. From the financial information recorded by a bookkeeper, an accountant can proceed to create a financial report for the organization. While a bookkeeper brings the daybooks to undergo the trial balance stage, the organization accountant will now prepare the balance sheet and income statement from the ledger and trial balance prepared by the bookkeeper.
The importance of bookkeeping and bookkeepers in an organization can’t be overemphasized. Without bookkeepers, a business firm will have no idea of their financial position and all the transactions they have carried out.
Qualities of a Bookkeeper
Some of the qualities of a bookkeeper are:
Good communication skills.
Every bookkeeper is expected to know how to communicate effectively. Bookkeeping involves the discussion of financial transactions of a company with the company’s owner or manager. So you must know how to convey your message to the understanding of the business owner. Business owners or managers are always expectant of basic financial transactions records like the balance sheet and profit and loss. The work of a bookkeeper is not only in the recording but also in explaining the financial transactions that are recorded.
• Having qualifications
Good experience in bookkeeping is a necessary qualification for bookkeepers. Every bookkeeper is expected to be skilled in every aspect of the job. Bookkeepers can gain qualifications when they study for different bookkeeping exams from different institutions like As a bookkeeper you can be qualified by experience, which means that you’ve been doing the job the International Association of Bookkeepers (IAB). Being skilled at double-entry bookkeeping is an advantage in bookkeeping.
Ability to make Inquiries
Bookkeeping involves investigation of business records. As a bookkeeper, you might be required to investigate the records made. For instance, in cases where the cost is beyond expectation with the account, the business manager or owner may require you to carry out an investigation about it.
Good knowledge of Information Communication Technology (ICT)
We are now in the realms of technology and most businesses are adapting to the internet. So every bookkeeper should have known about the internet and computers. Bank reconciliation and other common bookkeeping routines need the knowledge to access the bank data through the use of spreadsheets and internet to prepare the business cash flows.
Have knowledge of accounting software packages.
Just like earlier stated, everything about bookkeeping is now gradually one by computer and because of this, bookkeepers must have good knowledge of current accounting software packages.
• Honesty and Trustworthy
Bookkeeping in accounting involves the accessing of a company’s confidential and valuable information like the payroll records and bank statement. You must be trustworthy if you must be a bookkeeper
Conversant with Figures
Bookkeepers should have good knowledge of figures as ready and happy to work with it just like normal words.
Being in charge of a business firm daily financial transactions requires high-level of confidence. You must be confident as you will always discuss the financial records with your manager.
Preparedness to update skills.
Bookkeepers must be open to recent financial regulations. He must be ready to be updated with the business establishment he is working with
Being organized and effective management of time are required qualities of a good bookkeeper. Bookkeeping involves the carrying out of repetitive and routine tasks which are expected to be completed in time. Deadlines are part of bookkeeping, thus a bookkeeper must be organized.
Difference between Bookkeeping and Accounting
Both accounting and bookkeeping are important business functions that are closely related to each other. However, there is a difference between bookkeeping and accounting. Bookkeeping involves the recording of a business financial transactions while accounting involves the reporting, classifying, interpreting and summarizing of the financial data.