Bookkeeping definition and example

Many people think that bookkeeping is the same as accounting. While there is a thin connection between both terms, bookkeeping is not accounting. In general, this term isn't necessarily for accountants only. Every office has a sort of bookkeeping done by every staff either digitally or otherwise. This article discusses bookkeeping definition and example.

What does bookkeeping mean?

It is the act of collecting, recording, and keeping financial transactions for businesses. Also, it is an activity that involves knowing the accounting books, recording all business transactions in these books, and keeping the source documents for future reference.

Bookkeeping Explained

The job is done by a person or group of people called bookkeepers. An entity can employ an in-house individual or outsource this service. In either case, their job may include:

• Receiving and paying cash
• Recording bank transfer transactions
• Reconciling bank statements
• Posting payroll to staff accounts
• Ensuring all source documents are well kept for reference purposes and more

It is an act, therefore, it involves monotonous daily work. The bookkeeper does the same job all the time. This differs from accounting. The accountant job is more dynamic. More so, the activities of a bookkeeper involved recording business transactions from source documents. 

For example, when a cash sales transaction is initiated, a source document is filled. That's a receipt. Next, the bookkeeper records them in the cash book. And keep the document in a file for safekeeping and future reference. This activity is done every day within the business premises. 

It can be done either manually by recording transactions in ledger books or using a computer-assisted accounting technique (CAAT). These tools include Microsoft Excel, Google Sheets, and accounting software like QuickBooks, Zoho Book, and Sage 50.

Bookkeeping examples

Examples of books of accounts used in bookkeeping are stated in bullet points below:

• Cash Book/petty cash book
• Journal entries
• Payroll
• Budget sheet
• And any other duties required by the business owners

Benefits of bookkeeping

• It ensures that all business transactions done in a day are kept in a file.
• The transactions are kept safely through source documents for reference purposes
• Transactions recorded by the bookkeeper can be tracked for better decision-making by management.
• Learning bookkeeping provides jobs either in an organization or as self-employed.
• The activities are monotonous, therefore, they can be mastered by anyone.