Bookkeeping

Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations.

Transactions include purchases, sales, receipts and payments by an individual person, organization or corporation.

The origin of book-keeping is lost in obscurity, but recent research indicates that methods of keeping accounts have existed from the remotest times of human life in cities.

Babylonian records written with styli on small slabs of clay have been found dating to 2600 BC.

[2] Mesopotamian bookkeepers kept records on clay tablets that may date back as far as 7,000 years.

[3] The term "waste book" was used in colonial America, referring to the documenting of daily transactions of receipts and expenditures.

Bookkeeping first involves recording the details of all of these source documents into multi-column journals (also known as books of first entry or daybooks).

As a partial check that the posting process was done correctly, a working document called an unadjusted trial balance is created.

It is the accounts in this list, and their corresponding debit or credit balances, that are used to prepare the financial statements.

A daybook is a descriptive and chronological (diary-like) record of day-to-day financial transactions; it is also called a book of original entry.

A journal is a formal and chronological record of financial transactions before their values are accounted for in the general ledger as debits and credits.

The ledger is a permanent summary of all amounts entered in supporting Journals which list individual transactions by date.

A ledger takes each financial transaction from the journal and records it into the corresponding accounts.

Certified Public Accountants (CPAs) supervise the internal controls for computerized bookkeeping systems, which serve to minimize errors in documenting the numerous activities a business entity may initiate or complete over an accounting period.