Bookkeeping

What Is Bookkeeping?

What is bookkeeping? There are many misunderstandings of what bookkeeping actually is. We believe that by educating our clients on bookkeeping in general, we can give them a better understanding of what they need from the finance function of their own business.

 

Bookkeeping (book-keeping or book keeping) is the recording of all financial transactions undertaken by an individual or organisation. The organisation may be a business, a charitable organisation or even a local sports club. Bookkeeping is "keeping records of what is bought, sold, owed, and owned; what money comes in, what goes out, and what is left." A financial transaction is any event that involves money.

Individual and family bookkeeping involves keeping track of income and expenses in a cash account record, bank account statements, credit card statements, or savings account passbook. Individuals who borrow or lend money also track how much they owe to others or are owed from others.

Two common bookkeeping methods used by businesses and other organisations are the single-entry bookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping uses only income and expense accounts, recorded primarily in a "Revenue and Expense Journal". Double-entry bookkeeping requires posting (recording) each transaction twice, using debits and credits. 

Small business owners need to be aware of the latest penalties from HMRC if they do not maintain proper tax records. The HMRC intend investigate 50,000 small businesses a year which, they suspect of keeping poor record keeping that lead to an underpayment of tax. If small business owners fall foul of these checks, it may result in fines of up to £3000. Poor bookkeeping may be avoided by using a professional company such as The Local Bookkeeper.