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Bookkeeping is the process of recording, storing, and retrieving financial transactions of a business or organization. It is an essential aspect of accounting and provides valuable information for making informed business decisions.
The primary objective of bookkeeping is to ensure that all financial transactions are recorded accurately and in a timely manner. These transactions include sales, purchases, receipts, payments, and other relevant financial activities. Bookkeeping also involves the classification of these transactions into appropriate categories, such as assets, liabilities, and equity.
One of the key benefits of bookkeeping is that it helps businesses keep track of their financial performance over time. By regularly reviewing financial statements such as the income statement, balance sheet, and cash flow statement, business owners can gain insight into their business operations and identify areas where improvements can be made.
Bookkeeping can be done manually or through the use of computer software. Some common bookkeeping software programs include QuickBooks, Xero, and Sage. These software programs offer features such as automated bank feeds, invoicing, and financial reporting, which can save businesses time and improve the accuracy of their financial records.
A source document is a physical or digital record that provides evidence of a financial transaction. It is the original document that provides the details of a transaction, and it serves as the basis for all accounting entries related to that transaction.
Source documents can take various forms, such as invoices, receipts, purchase orders, bank statements, and shipping documents. They contain information such as the date of the transaction, the amount involved, the parties involved, and any other relevant details.
Maintaining accurate source documents is essential for effective accounting and financial management. They serve as a means of verifying the accuracy of accounting records and help to ensure that financial statements are reliable and trustworthy. In addition, they provide a means of tracking financial transactions over time, which is essential for budgeting, forecasting, and decision-making.
Types of Source Documents
Sales Invoice: A sales invoice is an important financial document issued by a business to its customers. It is a proof of sale, which outlines the goods or services that have been provided, their cost, and the date of the transaction. A sales invoice is a legal record that a business must maintain to track its sales, revenue, and taxes.
Purchase Invoice: A purchase invoice is a document issued by a supplier or vendor to the buyer or customer. It outlines the goods or services that have been purchased, their cost, and the date of the transaction. A purchase invoice is an important financial record for the buyer, as it helps to keep track of expenses and accounts payable.
Receipt: A receipt is a written or electronic document that confirms the payment of cash or other forms of payment. It is usually issued by a business to its customers as evidence of a successful transaction. A receipt contains details of the goods or services purchased, the amount paid, the date of transaction, and the mode of payment.
Voucher: A voucher is a financial document that provides evidence of a transaction. It may include details such as the date of the transaction, the amount paid or received, the purpose of the transaction, and the name of the parties involved. Vouchers are used to maintain accurate records of financial transactions and to prevent fraud.
Credit Note: A credit note is a financial document that is issued to a customer to inform them that their account has been credited as a result of an overcharge. It is issued by the seller or supplier and contains details of the original invoice, the amount to be credited, and the reason for the credit.
Debit Note: A debit note is a financial document that is issued to inform the customer that their account has been debited as a result of an undercharge or a correction. It is issued by the seller or supplier and contains details of the original invoice, the amount to be debited, and the reason for the debit.
Journals are publications that are regularly issued, often on a monthly, quarterly, or annual basis, and contain articles, research papers, and other written works that are focused on a specific subject or academic discipline. Journals are typically written for and by experts in the field, and they serve as an important source of information for scholars, researchers, and students who are interested in staying up-to-date with the latest developments and research in a particular area. Journals can be published in print or online, and they may be peer-reviewed, meaning that each article is evaluated by experts in the field before being accepted for publication. They can be listed as follows,
1. Cash book/Cash account
2. Sales book / Sales day book/Sales Journal
3. Purchases book/purchases day book/Purchase journal
4. Return inward book / Sales return book / Sales return journal
5. Purchases returns book/return the outward book/Return outward journal6. General journal /Principal journal / Journal proper