bookkeeping

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bookkeeping,

maintenance of systematic and convenient records of money transactions in order to show the condition of a business enterprise. The essential purpose of bookkeeping is to reveal the amounts and sources of the losses and profits for any given period. Proper bookkeeping should also reveal the nature and value of the assets and liabilities of a firm, as well as its net worth at the close of that period.

Bookkeeping records are kept in columnar form, using separate columns for the date of transaction, an explanation of the nature of the transaction, and its value. Other columns may be added. In general, two sets of columns are used, assets being placed in one set of columns and liabilities in the other set (a money value having been assigned to all assets and all liabilities of the business). Such an arrangement is called double entry. A balance sheet may be compiled at any time by totaling each column and subtracting the smaller total from the greater to give either a surplus or a deficit. The result is called the net worth, and it gives an indication of the financial state of a firm. A detailed balance for a period between two balance sheets is called a profit and loss statement.

The process of deciding whether to enter items into one set of columns or the other, i.e., into the debit side or the credit side, is called journalizing, since the analyzed items are placed in a journal, or daybook, soon after the transactions occur. Separate accounts of persons or sections are kept in a book called a ledger; the ledger is now often a computer file (created in "spreadsheet" software) rather than a physical book. The transfer of items from the journal to the ledger is called posting. In large businesses, the journal is broken into many sections, each concerning a separate function of the business, such as sales, purchases, accounts receivable, accounts payable, sales return, purchases return, and cash on hand. The journal also has sections for invoices, inventory, orders, cash, sales, bills, and checks.

Single-entry bookkeeping enters all debits and credits in a single set of columns in a journal and labels each entry Dr. (debit) or Cr. (credit). Thus in a single entry only one element of a transaction is entered. Single-entry bookkeeping fails to give detailed information as to the sources of gain or loss.

There are two main methods of accounting for money in a business. The cash method reports income in the year it is received and deducts expenses in the year they are paid. The accrual method reports income when it is earned and deducts expenses as they are incurred, regardless of whether the money has actually entered or left the business yet.

Any bookkeeping system must also account for all canceled checks, paid bills, duplicate deposit slips from banks, and other records of transactions. These records act as proof of the posted entries; they are usually organized chronologically or by type and are kept in filing cabinets. Bookkeeping machines, ranging from the simple adding machine to the computercomputer,
device capable of performing a series of arithmetic or logical operations. A computer is distinguished from a calculating machine, such as an electronic calculator, by being able to store a computer program (so that it can repeat its operations and make logical
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, help in maintaining properly organized books. Computers revolutionized bookkeeping and accounting systems, both for entering ledger items and for such operations as year-end profit-and-loss calculations.

The Babylonians, Egyptians, Greeks, and Romans kept business records. Double entry seems to have been first developed by the people of N Italy during the great commercial expansion of the 14th and 15th cents. and has consequently been called the Italian method. The system then spread to the Netherlands, England, and elsewhere. Single entry developed later.

See also accountingaccounting,
classification, analysis, and interpretation of the financial, or bookkeeping, records of an enterprise. The professional who supplies such services is known as an accountant. Auditing is an important branch of accounting.
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; auditingauditing,
examination and statement of accounts and of other documents connected with accounts by persons who have had no part in their preparation. Systems of financial inspection have long been used, especially in connection with public accounts.
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.

References in periodicals archive ?
The relationship between the daybook and account book can be seen clearly in the transactions recorded for Hasbrouck's customer, John Slut.
The final extant account book belonging to Scott is for a much later period, May 1823 to June 1826.
Ares EBS consultant, Yiting Chen, shared how to accurately grasp the fixed asset tax account books through E-business tools, and explained the operation of enterprise asset maintenance and account settlement.
The account book also records his epic journeys around the country keeping track of all his projects, and the problems he sometimes had getting some clients to pay.
The book is signed off on 7 October 1758 with the outgoings totalling 16,939 [pounds sterling] 19s 7d, and a surplus of 24 [pounds sterling] 3s 3d that was carried forward to the account book for the following season, which had already started on 18 September 1758 (see Plate 3).
The imperial waqfs prepared a main account book at the end of each accounting period, which covered usually a solar year and sometimes a lunar year.
Even with the blinders imposed by the account book, this intricately detailed exploration of life and trade around Moreton in Marsh points the way to a recalibration of how scholars interpret the social and economic history of England in this key period.
The account book is a complex manuscript, requiring considerable deciphering, researching and annotating--and regrets that it had previously been inaccessible are now dispelled by this excellent publication.
The account book also records Rougemont's religious exercises, revealing his spiritual as well as material life.
An account book, diary, statement of expense or similar log in which the taxpayer lists each element of an expenditure at or near the time it was made.
an account book, statement of expense or similar record) and documentary evidence (e.
The five papers in English discuss three remarkable Arabic documents from the Heidelberg Papyrus Collection dating to the first-third/seventh-ninth centuries, the testimony of the papyri and literary sources concerning death dates in Umayyad stipends registers, an Arabic ephemeris for the year 931-932 CE, Nekloni (al-Naqlun) and the Coptic account book British Library Or.