Book Keeping, Accounting and Double Entry Book Keeping
This note describes about the book-keeping and accounting. Bookkeeping is the recording of financial transactions. Transactions include sales, purchase, income, receipts and payment by an individual or organization. So, book-keeping helps to record these financial transaction in the form of journal, ledger, etc. Accounting is the process of systematic recording, analyzing, controlling and communication of the financial transactions. So, accounting also keeps the proper financial records of an organization and helps to maintain proper cash flow.
This note describes the different definitions of double entry book keeping system, its features and its advantages / importance / objectives. Book keeping is the process of recording financial transaction of a organization in a systematic and orderly manner. Double entry book keeping system is the modern, scientific and systematic book keeping system that says every financial transactions will have two account i.e. debit and credit. Double Entry Book Keeping System says that both debit and credit side affect every business financial transactions with equal amount between them.
Accounting is the sequential steps which includes identifying, classifying, summarizing and communicating financial transaction.The sequence of the step to be followed in accounting activities is known as accounting process or cycle. The accounting process is a continuous process in the life of business organization, it began with a recording of financial transactions and end with preparing final account.
The relationship of different assets, capital liabilities of the business expressed in an equation form is called the accounting equation. In other words , Assets = liabilities + owners equity is the most fundamental accounting equation of the double entry book- keeping system.