Book Keeping Essay

take hold safe economiseing it also referred as the keeping of book. discussion keeping is the process of keeping full, blameless, up-to-date assembly line records. Proper methods discount ease businesses effectively manage change flow, stay abreast of emolument and rednesses, and find plans for the future based on mo wageary tr residuums. Furthermore, keeping accurate book is compulsory by both federal and local impose agencies.The book keeping process involves making a record of the monies real by a business as well as the monies paying out. It encompasses money a companion owes to v oddmentors, employees, tax agencies, contractors, and any other singular or entity. Likewise, accurate records of amounts owed to a company by outside individuals and organizations atomic number 18 also recorded in a companys books.though necessary and beneficial to business owners, the task washstand be genuinely time consuming. With no exceptions, every fiscal amount that is pai d or received must(prenominal) be recorded. Addition every(prenominal)y, accuracy is of the utmost importance, making keeping the books in a rushed manner a very evil idea. As business owners atomic number 18 often lacking in time, galore(postnominal) choose to hire professional bookkeepers to keep company records well giveed.Of the more reasons for keeping accurate records, business and income taxes ar among the most important. In the coupled States, for example, the Internal R thus farue Service requires business owners to keep financial records that are complete and up-to-date. State and city tax agencies may require businesses to maintain accurate records as well. In fact, a business owner who fails to keep acceptable financial records may be liable for signifi sternt mo electronic ne dickensrkary fines or other penalties.A companys books are employ to determinusine the amount of taxes the company must pay, and they are also utilize in preparing tax returns. Somet imes, a tax agency may go under to investigate the information reported on a return or other type of tax-related document. In such(prenominal) cases, business owners arerequired to present accurate records for the tax agencys inspection. Failure to do so could lead to hefty fines, penalties, or in severe cases, imprisonment.Although hiring bookkeeping professionals may be a good idea for more companies, non all business owners can afford to do so. This is incidentity ac commendationed of smaller, home-based, or start-up businesses. Fortunately, there are many computer programs designed to realise the task of keeping the books manageable and less time consuming. galore(postnominal) programs divvy up all of the calculations for the user, taking the worry out of keeping accurate figures. ready(prenominal) even to those on tight budgets, this software licks record keeping easy.(N. Madison, 2013, well-advised Geek.)onlineACCOUNTING CYCLEThe tarradiddleing cycle is often descr ibed as a process that holds the following steps identifying, collecting and analyzing documents and minutes, enter the transactions in journals, posting the journalized amounts to work outs in the general and subsidiary ledgers, preparing an unadjusted essay eternal rest, perhaps preparing a work stable gear, determining and recording adjusting entries, preparing an adjusted trial balance wheel, preparing the financial contestations, recording and posting closing entries, preparing a post-closing trial balance, and perhaps recording reversing entries.Cycle and steps seem to be a carryover from the solar days of manual of arms bookkeeping and storying when transactions were first written into journals. In a separate step the amounts in the journal were posted to measures. At the end of each month, the remaining steps had to take place in run to get the monthly, manually- inclined(p) financial didacticss.Today, most companies use business relationship software that proc esses many of these steps simultaneously. The speed and accuracy of the software reduces the accountants make for a worksheet containing the unadjusted trial balance, adjusting entries, and the adjusted trial balance. The accountant can enter the adjusting entries into the software and can obtain the complete financial financial bids by simply selecting the reports from a menu. After recapitulationing the financial statements, the accountant can make additional adjustments and almost immediately obtain the revised reports. The software leave behind also prepare, record, and post the closing entries.(Harold,A.2013, be Coach.)online.SOURCE DOCUMENTSSource documents are documents, such as silver slips, invoices, etc. that form the rootage of (and serve as proof for) a transaction. In other words, they are the first documents that constitute relating to a transaction. Invoices, cash slips, receipts, check counterfoils, commit deposit slips ,credit nones , account notes ,vouche r , purchase orders and even internet payment confirmations are all source documents.For exampleInvoices honorable mention NotesReceiptsVoucherPurchase ordersleger OF PRIME ENTRY loudness of native ingress is book utilise in recording transaction. Books of prime entry are also known as books of original entry or subsidiary books. Types of books of prime entryBooks of prime entry are also known as either journals or daybooks. The term day book is, perhaps, more commonly used, as it more clearly indicates the temperament of these books of prime entry entries are made to them every day.The commonly used books of prime entry are barter Day Book /Sale JournalsSale journals is to record credit sales.Purchases Day Book/Purchases JournalsPurchases journals is to record credit purchases.Sales homecoming Day Book/Return In JournalsReturn in journals is to record returns from customers.Purchases Return Day Book/Return start JournalsReturn out journals is to record returns to suppliers. usual journal/The journalThe journal is to record other transactions.The cashbook is a combined account of the cash account and the bank account. It is the only one of the six daybooks that is both an account and a daybook at the same time. Apart from the cashbook, all the other double-entry accounts are kept in one of the three ledgers.Example for 3 pillar Cash BookLEDGER (T-ACCOUNT)The ledger is a collective term for the accounts of a business. (A ledger of accounts is like a school of fish). The accounts are in the shape of a T and thus are often referred to as T-accounts. In this step we take all the debits and credits (journals) relating to one account lets say bank and draw up an account for bank that shows all the transactions relating to it.The different types of ledgers most businesses use areSale LedgersSale ledgers is to record customers account balance.Purchases LedgersPurchases ledgers is to record suppliers account balance. General LedgersGeneral ledgers is to recor d miscellaneous account.ExamplePETTY CASH BOOKThe fiddling cash book is used to record the changes to the tiny cash fund both money put into the fund and money taken out. The fund is commenced with a petty cash advance cheque and excel up with a reimbursement cheque at the end of each petty cash period.The petty cash book is prepared from the petty cash vouchers, as well as the details from the advance and reimbursement cheque tail ends.The petty cash book is prepared fromadvance (and/or reimbursement) cheque butt/scompleted and authorised petty cash vouchers.The totals can be checked by cross-adding related column totals.The total of the vouchers (Cash Payments column total) added to the balance left in the petty cash fund (Balance column) should always able the imprest amount.TRIAL BALANCEA sheet displaying all the accounts of a business, pull up as a trial (test) of whether the total of all the debit balances equalize the total of all the credit balances (A balance is th e amount of an degree at a point in time. For example, The balance in the bank account on the 1st of January was $5,000.). The trial balance is prepared as a closing check just before the financial statements are drawn up. The trial balance is our penultimate step in the business relationship cycle. Example for Trial BalanceFINAL ACCOUNTFinal accounts are all of the financial statement for a business or company at the end of the fiscal or calendar year, on whichever the business calendar the company operates. The statements for the final accounts show the gross profit and net income of the company. A number of accounts are included, such as the profit and loss statement for the business, the balance sheet, and the trading account. The profit and loss statement tracks all of the income that comes into the company, as well as the expenses that the company pays out.The profit and loss statement covers a specialized period typically the fiscal year, but it can also cover the calend ar year. It shows how revenue becomes net income, and whether or not the company made money for the year. While the company tracks these figures throughout the year, the final accounts include the statement for the cumulative fiscal or calendar year. The balance sheet is another one of the business financial statements that are prepared as part of the final accounts process when the year closes out. The balance sheet provides a quick look at how the company is doing at that specific moment in time, at the end of the year. In addition to assets and liabilities, a balance sheet also includes information on shareholder equity. work accounts cover profits and losses incurred from trading securities. Many companies invest in stocks, bonds, mutual funds and other types of investment funds. The final accounts for the trading account show the amount of gain or loss from these investments at the end of the year that the company runs on. Final accounts and the statements that make up these ac counts typically alleviate companies to prepare their various tax returns. If the company accountant prepares the tax statements, then the accountant prepares these statements for his or her own use. If the company hires an outside accountant or history firm, then the statements for the final accounts are handed over to the trinity party, so they have the information they need to prepare the companys tax returns and any of tax paperwork that is required. (Kristie,L and Wilborn,C.2013,Wise Geek)onlineINCOME STATEMENTA financial statement that measures a companys financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year. overly known as the profit and loss statement or statement of revenue and expense.Exa mple for Income StatementsSTATEMENT OF FINANCIAL POSITIONA statement of financial position, also known as a balance sheet, is a financial document that provides an overview of an entitys finances at a granted point in time. These statements are commonly used by companies greathearted and small, but they can also be applied to personal finances, for throng who want to generate a document that they can use to review their financial situation for the purpose of making budgeting decisions or financial plans. Many accounting software programs have mechanisms to automatically create one. There are two main areas on a statement of financial position. maven covers the assets, everything owned by the person or company, including real estate, cash in hand, contents of bank accounts, and so forth. The other side includes the liabilities, funds owed. A statement usually breaks these sections up into several categories for ease of reference, so that slew can quickly look up a topic of parti cular interest, such as accounts payable or overdue loans.The liabilities also include the ownership equity or the shareholder equity in the business. The assets should equal the liabilities once the ownership or shareholder equity has been factored in, and if they do not, it is a sign that the financial statement is out of balance. This is in accordance with the accounting equation, which states that assets = liabilities + ownership or shareholder equity. Incidentally, this explains the term balance sheet, which reflects the idea that the two sections of the sheet should be equal or balanced.Commonly, a statement of financial position will be generated at the end of every month. flavour up past months can provide information about how a companys finances are progressing, and these documents can also be compared with statements from the same month in prior years. Using this document, decisions can be made about the next steps to take. If, for example, a company has a lot of assets, it may be a sign that it can comfortably expand because it has the available capital to do so.Companies that are publicly traded must provide public disclosures about their financial health, including statements of financial position. These are provided to shareholders by request and are also commonly published to make them readily accessible to prospective investors. If a company has a website, they might be found on a section of the website that includes documents that the company is required to demote by law. (Smitch,S. and Wallace,O.2013,Wise Geek)onlineExample for Statement of Financial PositionCONCLUSIONBook keeping is important to proper accounting records because proper methods can help businesses effectively manage cash flow, stay abreast of profit and losses, and develop plans for the future based on financial trends. Furthermore to complete the financial account, accounting cycle are used. The accounting cycle included source of document, books of prime entry, ledgers , trial balance and the final accounts.REFERENCE1. Anon.2013,Book of Prime intromission and Ledgers.online.Available from World Wide vane http//principlesofaccounting2.com/topics/books-of-prime-entry-and-ledgers/ Accessed 05/07/2013 2. Anon.2013,The Accounting Cycle.online.Available from World Wide Web http//www.accounting-basics-for-students.com/accounting-cycle.html Accessed 05/07/2013 3. Anon.2013,Income Statement.online.Available from World Wide Web http//www.investopedia.com/terms/i/incomestatement.asp Accessed 05/07/2013 4. Beanne,O.2013,The Complete Accounting Cycle.online.Available from World Wide Web http//youraccountingcoach.blogspot.com/2013/01/the-complete-accounting-cycle.html. Accessed 25/01/2013