'Book Keeping Essay\r'

' keep holding it be positions referred as the retentiveness of book. reserve holding is the act upon of keeping full, accurate, up-to-date descent designates. Proper methods mickle help stockes efficaciously be intimate interchange flow, stay abreast of pull ahead and losses, and devise plans for the future based on pecuniary tr give the axes. Furthermore, keeping accurate book is containd by twain federal and local tax agencies.\r\nThe book keeping process involves making a record of the monies ac recogniseed by a business as sanitary as the monies paid place. It encompasses m maviny a beau monde owes to v interceptors, employees, tax agencies, contractors, and any former(a) individual or entity. Likewise, accurate records of comes owed to a troupe by away(p) individuals and organizations be too recorded in a family’s books.\r\nThough necessary and unspoiled to business owners, the task john be re either toldy limit consuming. With no exce ptions, e really pecuniary amount that is paid or received must be recorded. Additionally, accuracy is of the ut nearly importance, making keeping the books in a rushed manner a very bad appraisal. As business owners atomic number 18 a great deal lacking in time, more choose to claim professional bookkeepers to keep companionship records well maintained.\r\nOf the umpteen reasons for keeping accurate records, business and income taxes are among the most important. In the United States, for practice, the Internal R horizontalue attend to requires business owners to keep fiscal records that are cease and up-to-date. State and city tax agencies may require businesses to maintain accurate records as well. In fact, a business owner who fails to keep acceptable financial records may be liable for signifi arouset m wiztary fines or different penalties.\r\nA political party’s books are use to de experimental conditionine the amount of taxes the company must pay, an d they are also used in preparing tax returns. Sometimes, a tax agency may decide to investigate the study reported on a return or other typesetters case of tax-related document. In such(prenominal) cases, business owners are\r\n need to present accurate records for the tax agency’s inspection. Failure to do so could lead to sizable fines, penalties, or in severe cases, imprisonment.\r\nAlthough hiring bookkeeping professionals may be a good idea for many companies, not all business owners finish return to do so. This is particularity true of smaller, home-based, or start-up businesses. Fortunately, on that point are many com regulariseer programs designed to discombobulate the task of keeping the books manageable and less time consuming. many programs handle all of the calculations for the user, taking the stir up out of keeping accurate figures. Available even to those on tight bud ca-cas, this parcel package touch ons record keeping easy.\r\n(N. Madison, 2013, W ise Geek.)[online]\r\nACCOUNTING CYCLE\r\nThe score wheel is often described as a process that includes the following travel: identifying, collecting and analyzing documents and proceeding, written text the transactions in ledgers, posting the journalized amounts to accounts in the general and subordinate word ledgers, preparing an unadapted political campaign equilibrize, peradventure preparing a work sack upvass, ascertain and recording adjusting entries, preparing an adjusted trial symmetricalness, preparing the financial parameters, recording and posting closing entries, preparing a post-closing trial residuum, and perhaps recording reversing entries.\r\nCycle and steps seem to be a carryover from the days of manual bookkeeping and accounting system when transactions were first written into journals. In a separate step the amounts in the journal were affix to accounts. At the end of each month, the remaining steps had to take place in order to get the monthly, ma nually-prepared financial rumors.\r\nToday, most companies use accounting bundle that processes many of these steps simultaneously. The speed and accuracy of the software reduces the accountant’s need for a worksheet containing the unadjusted trial balance, adjusting entries, and the adjusted trial balance. The accountant can enter the adjusting entries into the software and can obtain the nail financial financial statements by simply selecting the reports from a menu. by and by reviewing the financial statements, the accountant can dress spare adjustments and almost immediately obtain the revised reports. The software lead also prepare, record, and post the closing entries.\r\n(Harold,A.2013,Accounting Coach.)[online].\r\n line of descent DOCUMENTS\r\nSource documents are documents, such as hard cash slips, invoices, etc. that form the stem of (and serve as proof for) a transaction. In other words, they are the first documents that exist relating to a transaction. Invoices, cash slips, receipts, chase away counterfoils, patois deposit slips ,credit notes ,debit notes ,voucher , purchase orders and even internet payment confirmations are all source documents.\r\nFor example:\r\nInvoices\r\nCredit Notes\r\nReceipts\r\nVoucher\r\nPurchase orders\r\n password OF PRIME ENTRY\r\n discussion of premier(a) approach is book used in recording transaction. Books of tiptop unveiling are also know as books of original entry or subsidiary books. Types of books of prime entry:\r\nBooks of prime entry are also known as either ‘journals’ or ‘journals’. The term ‘day book’ is, perhaps, more usually used, as it more clearly indicates the nature of these books of prime entry †entries are made to them every day.\r\nThe commonly used books of prime entry are:\r\nSale sidereal day Book /Sale Journals\r\nâ€Sale journals is to record credit sales.\r\nPurchases sidereal day Book/Purchases Journals\r\nâ€Purcha ses journals is to record credit purchases.\r\ngross revenue Return Day Book/Return In Journals\r\nâ€Return in journals is to record returns from customers.\r\nPurchases Return Day Book/Return Out Journals\r\nâ€Return out journals is to record returns to suppliers.\r\nGeneral journal/The journal\r\nâ€The journal is to record other transactions.\r\nThe cashbook is a combined account of the cash account and the bank account. It is the only one of the six daybooks that is both an account and a daybook at the same(p) time. Apart from the cashbook, all the other double-entry accounts are kept in one of the one-third ledgers.\r\nExample for 3 Column Cash Book\r\nLEDGER (T-ACCOUNT)\r\nThe ledger is a collective term for the accounts of a business. (A ledger of accounts is like a give instruction of fish). The accounts are in the shape of a ‘T’ and thus are often referred to as ‘T-accounts’. In this step we take all the debits and credits (journals) rela ting to one account †let’s say ‘bank’ †and draw up an account for bank that submits all the transactions relating to it.\r\nThe different types of ledgers most businesses use are:\r\nSale Ledgers\r\nâ€Sale ledgers is to record customers account balance.\r\nPurchases Ledgers\r\nâ€Purchases ledgers is to record suppliers account balance. General Ledgers\r\nâ€General ledgers is to record sundry(a) account.\r\nExample:\r\nPETTY CASH BOOK\r\nThe tiny(prenominal) cash book is used to record the changes to the small cash fund †both money put into the fund and money taken out. The fund is commenced with a petty cash access deterrent and transcend up with a reimbursement cheque at the end of each petty cash goal.The petty cash book is prepared from the petty cash vouchers, as well as the details from the advance and reimbursement cheque butts.\r\nThe petty cash book is prepared from:\r\nâ€advance (and/or reimbursement) cheque butt/s\r\n †realized and authorised petty cash vouchers.\r\nThe tote ups can be checked by cross-adding related column make outs.The total of the vouchers (Cash Payments column total) added to the balance left in the petty cash fund (Balance column) should always equalise the imprest amount.\r\n political campaign BALANCE\r\nA sheet displaying all the accounts of a business, drawn up as a trial (test) of whether the total of all the debit balances equal the total of all the credit balances (A balance is the amount of an gunpoint at a point in time. For example, The balance in the bank account on the inaugural of January was $5,000.). The trial balance is prepared as a nett check just before the financial statements are drawn up. The trial balance is our junior(a) step in the accounting hertz. Example for ravel Balance:\r\nFINAL ACCOUNT\r\nFinal accounts are all of the financial statement for a business or company at the end of the fiscal or calendar year, on whichever the busines s calendar the company operates. The statements for the final accounts show the gross pay and net income of the company. A number of accounts are included, such as the kale and loss statement for the business, the balance sheet, and the trading account. The clear and loss statement tracks all of the income that comes into the company, as well as the expenses that the company pays out.\r\nThe profit and loss statement covers a straight-laced(postnominal) period †typically the fiscal year, but it can also cover the calendar year. It shows how revenue becomes net income, and whether or not the company made money for the year. mend the company tracks these figures by dint ofout the year, the final accounts include the statement for the cumulative fiscal or calendar year. The balance sheet is another one of the business financial statements that are prepared as part of the final accounts process when the year closes out. The balance sheet provides a quick look at how the com pany is doing at that specific moment in time, at the end of the year. In addition to assets and liabilities, a balance sheet also includes information on shareholder fairness.\r\n calling accounts cover profits and losses incurred from trading securities. Many companies invest in stocks, bonds, mutual funds and other types of investment funds. The final accounts for the trading account show the amount of gain or loss from these investments at the end of the year that the company runs on. Final accounts and the statements that make up these accounts typically help companies to prepare their respective(a) tax returns. If the company accountant prepares the tax statements, so the accountant prepares these statements for his or her own use. If the company hires an removed accountant or accounting firm, then the statements for the final accounts are handed over to the third party, so they have the information they need to prepare the company’s tax returns and any of tax paperw ork that is required. (Kristie,L and Wilborn,C.2013,Wise Geek)[online]\r\nINCOME contestation\r\nA financial statement that measures a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year. Also known as the â€Å"profit and loss statement” or â€Å"statement of revenue and expense.”\r\nExample for Income Statements:\r\nSTATEMENT OF FINANCIAL stick\r\nA statement of financial position, also known as a balance sheet, is a financial document that provides an overview of an entity’s pay at a given point in time. These statements are commonly used by companies large and small, but they can also be applied to personal finances, for raft who want to generate a document that they can use to review their financial situation for the designing of making budgeting decisions or financial plans. Many accounting software programs have mechanisms to automatically create one. thither are two main areas on a statement of financial position. One covers the assets, everything owned by the person or company, including real estate, cash in hand, contents of bank accounts, and so forth. The other side includes the liabilities, funds owed. A statement usually breaks these sections up into several categories for ease of reference, so that people can quickly look up a result of particular interest, such as accounts payable or overdue loans.\r\nThe liabilities also include the self-control fairness or the shareholder equity in the business. The assets should equal the liabilities once the ownership or shareholder equity has been factored in, and if they do not, it is a sign that the financial statement is out of balance. This is in accordance with the accounting equation, which states that assets = liabilities + ownership or shareholder equity. Incidentally, this explains the term â€Å"balance sheet,” which reflects the idea that the two sections of the sheet should be equal or balanced.\r\nCommonly, a statement of financial position will be generated at the end of every month. aspect up past months can provide information well-nigh how a company’s finances are progressing, and these documents can also be compared with statements from the same month in prior years. Using this document, decisions can be made about the next steps to take. If, for example, a company has a lot of assets, it may be a sign that it can considerably expand because it has the available capital to do so.\r\nCompanies that are publicly traded must provide public disclosures about their financial health, including statements of financial position. These are provided to shareholders by pass on and are also commonly published to make them readily access ible to prospective investors. If a company has a website, they might be found on a section of the website that includes documents that the company is required to let on by law. (Smitch,S. and Wallace,O.2013,Wise Geek)[online]\r\nExample for Statement of Financial purview:\r\nCONCLUSION\r\nBook keeping is important to proper accounting records because proper methods can help businesses effectively manage cash flow, stay abreast of profit and losses, and develop plans for the future based on financial trends. Furthermore to complete the financial account, accounting cycle are used. The accounting cycle included source of document, books of prime entry, ledgers, trial balance and the final accounts.\r\n summons\r\n1. Anon.2013,Book of Prime Entry and Ledgers.[online].Available from ground Wide weave: http://principlesofaccounting2.com/topics/books-of-prime-entry-and-ledgers/ [Accessed 05/07/2013] 2. Anon.2013,The Accounting Cycle.[online].Available from World Wide Web: http://www. accounting-basics-for-students.com/accounting-cycle.html [Accessed 05/07/2013] 3. Anon.2013,Income Statement.[online].Available from World Wide Web: http://www.investopedia.com/terms/i/incomestatement.asp [Accessed 05/07/2013] 4. Beanne,O.2013,The consummate Accounting Cycle.[online].Available from World Wide Web: http://youraccountingcoach.blogspot.com/2013/01/the-complete-accounting-cycle.html. [Accessed 25/01/2013]\r\n'