Bookkeeping is the systematic recording of day-to-day financial transactions of an organisation in books of accounts. Transactions include purchases, sales, receipts and payments by individuals or organisations.

Bookkeeping is normally carried out by a bookkeeper/accounting clerk or accounting technician. He/she is responsible for recording financial transactions daily into various day-books/journals. The bookkeeper normally brings the books to the trial balance stage.

Accounting is a practice and body of knowledge concerned primarily with (1) methods for recording transaction, (2) keeping financial records ( 3) performing internal audits, (4)reporting and analysing financial information to the management, and (5) advising on taxation matters.

It is an art of recording, summarising, reporting, and analysing financial transactions. Accounting provides details of every aspect of a business which allow analysis and interpretation of business records leading to reveal the trends of the business and its future prospects. Accountants use the records provided by the bookkeepers to produce and analyse financial reports.

In business, a document is produced each time a transaction occurs. Invoices or till-slips are used for sales and purchases. Deposit slips are used when deposits are made to bank accounts. Cheques are written to pay money out of the bank accounts or when withdrawal are made. Debit Notes and Credit Notes are also source documents of transactions.

Bookkeeping involves,first of all, recording the source documents to the relevant book of first entry/prime entry/subsidiary books. Cash Book, Purchases Book, Sales Book, Purchases Returns/Returns Outwards Book, Sales Returns/Returns Inwards Book, Petty Cash Book and General Journal are various subsidiary books. Eventually all the entries in the subsidiary books will be posted to the corresponding ledger accounts.

Transactions are recorded in books of accounts using Double Entry System. It is a system of recording transactions in books of accounts whereby a transaction is entered in two accounts in the ledger, one on the debit/left hand side and the other on the credit/right hand side. Making a record of a transaction on the debit side of an account is called debiting and recording on the credit side of an account is called crediting.

Double Entry Accounting is governed by the accounting equation: Assets = Capital(equity) + Liabilities.

For the accounts to remain in balance, a change in one account must be matched with a change in another account. These changes are made by debits and credits to the accounts.

Debits and credits in accounts are made as follows:

Debits are recorded on the left side of a T account in a ledger. Debits increase balances in asset accounts and expense accounts and decrease balances in liability accounts, revenue accounts, and capital accounts.
Credits are recorded on the right side of a T account in a ledger. Credits increase balances in liability accounts, revenue accounts, and capital accounts, and decrease balances in asset accounts and expense accounts.
Debit accounts are asset and expense accounts that usually have debit balances, i.e. the total debits usually exceeds the total credits in each debit account.
Credit accounts are revenue (income, gains) accounts and liability accounts that usually have credit balances.

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