Importance of Bookkeeping
Functions of Bokkeeping
Three Golden Rules of Accounts
Types of Accounts
All assets which are tangible and intangible are Real accounts.
All accounts related to individuals, firms, companies, etc. are personal accounts.
All accounts related to expenses, losses, incomes or gains
Methods of Bookkeeping
There are two methods of Bookkeeping which are as follows:
Difference between Single entry system and Double entry system.
P&L, Balance sheet
Basic Types of Bookkeeping Books
- CASH BOOK: In this book, transactions held in cash or by cheque are recorded. There are two sides in the cash book, left-hand side all cash receipts are recorded while the right-hand side all cash payments are recorded.
There are five cash book types:-
a. Single column cash book: Records cash receipt and cash payment.
b. Double column cash book: Records cash receipt, receipt of cash discount, cash payment, cash discount allowed
c. Triple column cash book: All transactions of double column cash book along with cheque received and cheque paid.
d. Bank cash book: Records receipt and payment of cheque & cash discount allowed and received.
e. Petty cash book: Small payments of cash are recorded.
- PURCHASE BOOK: Credit purchase of goods is recorded here. Cash Purchase and credit purchase of assets are not recorded.
- SALES BOOK: Records all sales. Cash sales and credit sales of assets are not recorded.
- PURCHASE RETURN BOOK:This book is also known as Return Outward Book, which records the credit purchase, which is a return.
- SALES RETURN BOOK: This book is also known by name Return Inward Book, which records sales that are returned by customers.
- BILLS RECEIVABLE BOOK: When credit sales are made, a guarantee in the form of a bill is taken from customers that payment will be made in the future. These bills are maintained in Bills receivable book.
- BILLS PAYABLE BOOK: When credit purchase is made, a guarantee in the form of a bill is given to the seller that payment will be made in the future. These bills are maintained in Bills payable book.
- JOURNAL: Entries like adjustment entries, opening entries, closing entries, transfer entries, purchase and sale of assets on Credit, interest on capital, and interest on the drawing are recorded in a journal.
- LEDGERS: Ledger is the record of accounts. It sums up each account’s total, which is then transferred to balance sheet and Profit /Loss.
Abbreviations used in Bookkeeping
Profit & Loss