BOOKKEEPING

Bookkeeping is an essential accounting tool. A small business or company may employ only one
bookkeeper, who records all of the financial data by hand; large organizations may employ many
bookkeepers, who use electronic and mechanical equipment for a large part of their work. Each
organization has its own bookkeeping requirements, but all systems operate on the same basic
principles. The bookkeepers themselves must be accurate, good in math, and meticulous; that is,
they must be very careful to record each detail in its proper place.

About 3,000 B.C, the Sumerians, the Egyptians, and other people of the Middle East developed
the first known business records. The results of tax collections, farming harvests, and the
transactions of merchants were recorded by means of written numbers. The Romans, too, were
prolific keepers of records. Indeed, Roman numerals were used in many parts of Europe until the
fifteenth century A.D. The stimulus for modern bookkeeping came with the introduction of
Arabic, or Hindu-Arabic, numerals and the decimal system in the twelfth century A.D. Most
people today use Arabic numerals.

The two basic systems of bookkeeping are double-entry and single-entry. The double-entry
method was perfected by the merchants of Venice during the fifteenth century and is still used
today. The basic principle of double-entry bookkeeping is that every transaction has a twofold
effect. In other words, a value is received and a value is yielded or parted with. Both effects,
which are equal in amount, must be entered completely in the bookkeeping records.

An account is a record of the financial transactions that concern one item or a group of similar
items. The account includes categories of financial data for each area of interest during a specific
period: the value at the beginning of a period, changes in value during the same period, and the
value at the end of a period. The broad areas of interest can be labeled assets, liabilities, and net
worth. Income and expense accounts are totaled at regular intervals, and the resulting profit or
loss is posted to a capital account.

Anything of value that a business or organization own is commonly known as an asset. Asset
accounts include cash, which is the money on hand or in the bank; furniture and fixtures;
accounts receivable, the claims against customers that owe money; stock or inventory; office
supplies; and many others that show what the organization owns.
Debts owed to creditors are known as liabilities. If money is owed to an organization or person
for things or services purchased on credit, this liability is called an account payable. Other
liabilities include wages or salaries that are owed to employees, or taxes that have not yet been
paid.

The value of the business to the owner or owners is known as capital. Other terms used to
designate capital are proprietorship, owners’ equity (usually abbreviated OE), ownership, or net
worth.

A separate account is kept for each asset, liability, and capital item so that information can be
recorded for each of them. Accounts are also maintained for income and for expenses, and like
assets, liabilities, or capital, these accounts are also entered in the ledger, which is detailed listing
of all the accounts of an organization. Entries from all the journals are transferred to the ledger at
regular intervals. This process called posting is usually done monthly.

Journals, or books of original entry, are designed to record information about different
transactions, including sales, purchases, cash receipts, cash disbursements, and many others.
Journals have two or more columns to record increases or decreases in the accounts affected by
the transaction, and they often have space for a date and an explanation of the transaction.

All transactions affect at least two accounts. Each transaction must be analyzed to determine
which accounts are affected, and whether they should be increased or decreased. An entry made
on the left-hand side or column of an account is called a debit, while an entry made on the right-
hand side or column is a credit. Debit, usually abbreviated DR, at one time meant value received,
or literally he owes. Credit, usually abbreviated CR, meant value parted with, or literally he
trusts. In modern bookkeeping, debit refers only to the left-hand side of an account, whereas
credit refers to the right-hand side. Some bookkeepers use a far right-hand column to keep an up-
to-date balance of the account.
Rangkuman:

Small companies can hire just one bookkeeper, that records financial data by hand. But large
organizations can hire multiple bookkeepers, which use both electronic and mechanical
implement. Every organization has bookkeeping requirements, but the main principles of its
operating system remain the same.

The Sumerians, Egyptians, and other peoples of the Middle East expanded the first known
business records around 3,000 BC. The Romans were also productive recorders, Roman
numerals were used extensively until the 15th century AD in parts of Europe. Modern
bookkeeping emerged with the recognition of the Arabic numeral system in the 12th century,
which is used by most people.

The basic systems of bookkeeping are double entry and single entry. The double entry method,
which is still in use today, was refined by Venetian merchants during the 15th century, and has
the fundamental principle that every transaction has a dual effect.

Records of financial transactions that involve one or a group of identical items and contain
categories of financial data for each area of interest (such as assets, liabilities and net worth)
during a specified period are referred to as accounts. Income and expense accounts can be added
together on a regular basis, while capital accounts record gains or losses.

The goods of value that the business owns are called assets (including cash; furniture and
fixtures; accounts receivable, claims against customers who owe; inventory; office equipment;
and others).

Debts owed to creditors are called liabilities, including salaries and taxes. If money is owed to
the organization for something that is purchased on credit it is called an account payable.

The business value to the owners called capital, owner's equity, ownership or net worth.

Separate accounts are kept for each asset, liability, and capital, income and expense items as
well. Entries from all journals are posted to the ledger every month.
A journal is created to record information about dissimilar transactions, increases or decreases in
accounts affected by transactions, and often has space for transaction dates and descriptions.

Each transaction is examined to decide which accounts are affected, and which accounts should
be added or removed. The entries on the left are called debits/DR (value received), while the
entries on the right are called credits/CR (value parted with). The rightmost column is used to
maintain current account balances by several bookkeepers.

1. How do bookkeeping procedures in a large organization differ from those in a small one?
Are the basic principles the same or different?
Bookkeeping is an essential accounting tool. A small business or company may employ
only one bookkeeper, who records all of the financial data by hand; large organizations
may employ many bookkeepers, who use electronic and mechanical equipment for a
large part of their work.
(Small companies can hire just one bookkeeper, that records financial data by hand, while
large organizations can hire multiple bookkeepers, which use both electronic and
mechanical implement).
2. What are some of the basic requirements for a bookkeeper?
Each organization has its own bookkeeping requirements, but all systems operate on the
same basic principles. The bookkeepers themselves must be accurate, good in math, and
meticulous; that is, they must be very careful to record each detail in its proper place.
(Every organization has bookkeeping requirements, but the main principles of its
operating system remain the same. The bookkeeper must be proper, good at math, and
thorough; they must record every detail in the appropriate place).
3. When were the first known business records kept? By whom? What kind of records were
kept?
About 3,000 B.C, the Sumerians, the Egyptians, and other people of the Middle East
developed the first known business records. The results of tax collections, farming
harvests, and the transactions of merchants were recorded by means of written numbers.
The Romans, too, were prolific keepers of records.
 (The Sumerians, Egyptians, and other peoples of the Middle East expanded the first
known business records around 3,000 BC. The Romans were also productive recorders,
Roman numerals were used extensively until the 15th century AD in parts of Europe).
4. How did modern bookkeeping begin?
The stimulus for modern bookkeeping came with the introduction of Arabic, or Hindu-
Arabic, numerals and the decimal system in the twelfth century A.D. Most people today
use Arabic numerals.
(Modern bookkeeping emerged with the recognition of the Arabic numeral system in the
12th century, which is used by most people).
5. What are the two basic methods of bookkeeping?
The two basic systems of bookkeeping are double-entry and single-entry.
(The basic systems of bookkeeping are double entry and single entry).
6. When was the double-entry method introduced? By whom? What is its basic principle?
The double-entry method was perfected by the merchants of Venice during the fifteenth
century and is still used today. The basic principle of double-entry bookkeeping is that
every transaction has a twofold effect. In other words, a value is received and a value is
yielded or parted with. Both effects, which are equal in amount, must be entered
completely in the bookkeeping records.
(The double entry method, which is still in use today, was refined by Venetian merchants
for 15th century, and has the fundamental principle that every transaction has a dual
effect (the value is received and the value is generated or separated)).
7. What is an account? What are the three categories of financial data listed in an account?
An account is a record of the financial transactions that concern one item or a group of
similar items. The account includes categories of financial data for each area of interest
during a specific period: the value at the beginning of a period, changes in value during
the same period, and the value at the end of a period.
(Records of financial transactions involving one item or group of similar items are the
definition of an account. The account includes categories of financial data for each area
of interest during a specific period: values at the beginning of the period, changes in
values during the same period, and values at the end of the period).
8. What broad areas of interst is bookkeeping concerned with?
 The broad areas of interest can be labeled assets, liabilities, and net worth. Income and
expense accounts are totaled at regular intervals, and the resulting profit or loss is posted
to a capital account.
(The broad areas of interest can be labelled assets, liabilities, and net worth. Income and
expense accounts can be added together on a regular basis, while capital accounts record
gains or losses)
9. What is the difference between an asset and a liability? Give an example of each.
Anything of value that a business or organization own is commonly known as an asset.
Asset accounts include cash, which is the money on hand or in the bank; furniture and
fixtures; accounts receivable, the claims against customers that owe money; stock or
inventory; office supplies; and many others that show what the organization owns. Debts
owed to creditors are known as liabilities. If money is owed to an organization or person
for things or services purchased on credit, this liability is called an account payable.
Other liabilities include wages or salaries that are owed to employees, or taxes that have
not yet been paid.
(The goods of value that the business owns are called assets (including cash; furniture
and fixtures; accounts receivable, claims against customers who owe; inventory; office
equipment; and others). Debts owed to creditors are called liabilities, including salaries
and taxes. If money is owed to the organization for something that is purchased on credit,
this liability is called an account payable).
10. What is the term used for the value of a business to its owners? What other terms refer to
the same concept?
The value of the business to the owner or owners is known as capital. Other terms used to
designate capital are proprietorship, owners’ equity (usually abbreviated OE), ownership,
or net worth.
(The business value to the owners called capital. Other terms used to designate capital are
proprietorship, owner's equity, ownership or net worth)
11. What is a ledger? What kinds of accountants are entered in it?
A separate account is kept for each asset, liability, and capital item so that information
can be recorded for each of them. Accounts are also maintained for income and for
 expenses, and like assets, liabilities, or capital, these accounts are also entered in the
ledger, which is detailed listing of all the accounts of an organization.
(Ledger is a detailed list of all organizational accounts. The accounts that are included in
the ledger are income, expenses, assets, liabilities, and capital. Entries from all journals
are posted to the ledger every month).
12. What is posting?
Entries from all the journals are transferred to the ledger at regular intervals. This process
called posting is usually done monthly.
(Posting is the process of moving entries from all journals to the ledger at regular
intervals, usually monthly).
13. What information is recorded in journals?
Journals, or books of original entry, are designed to record information about different
transactions, including sales, purchases, cash receipts, cash disbursements, and many
others.
(Journals are created to record information about dissimilar transactions (including sales,
purchases, cash receipts, cash disbursements, etc.), increases or decreases in accounts
affected by transactions
14. On which side of an account are debits entered? On which side are credits entered? What
do these terms mean literally? How are they commonly abbreviated?
An entry made on the left-hand side or column of an account is called a debit, while an
entry made on the right-hand side or column is a credit. Debit, usually abbreviated DR, at
one time meant value received, or literally he owes. Credit, usually abbreviated CR,
meant value parted with, or literally he trusts
(Entries on the left are called debits/DR (value received), while entries on the right are
called credits/CR (value parted with)).
15. For what purpose do some bookkeepers use far right-hand column in their ledgers?
Some bookkeepers use a far right-hand column to keep an up-to-date balance of the
account.
(The rightmost column is used to maintain current account balances by several
bookkeepers).