By: vish ks
Submitted: 2010-04-09 04:38:51 | Word Count: 534
If one puts it in very simple and basic terms, it can be defined like this. Bookkeeping is the recording of a company's income and expenses in a set of account books known as ledgers. Income and expenses are also termed as receipts and payments, inflows and outflows, and revenue and expenditure, respectively depending on the generally used and accepted terminology used by your company or industry. The double entry system forms the basis of a good bookkeeping practice. Many non-accountant staff and non-bookkeepers get lost in their bookkeeping activities right from the very start because they do not fully understand the double entry system. In fact, these are people who are mostly unfamiliar with bookkeeping practices and accounting principles. So, what exactly is meant by double entry? Simply put it, double entry means to enter each piece of data, financial transaction or information two times into your ledger books. Whether the data or transaction or information is a sales invoice, or a receipt issued for a payment received or even a payment voucher prepared for a payment that was made earlier, all these data will be entered into the books once as a debit and once as a credit under the respective categories.
The end result is that, by entering the same piece of data two times, once under the debit section and once under the credit section, the account balance will leave a zero when the total of debits and total of credits get deducted from each other. For instance, if you receive a payment of $1000 for a cash sale, you would debit the cash account and credit the sales figure with that amount. So, when one prepares the trial balance, one’s cash account balance would show a debit balance of $1000 while one’s sales account balance would display a credit balance figure of that same amount. This simply means that one’s trial balance is in a state of exemplary balance. So, why is it the double entry instead of single entry? In fact, people will argue that a single entry system is one that is easy to use. This is because you need to enter the financial transaction, or data or information just once. But this has to be noted; a double entry system will provide one with an automatic check and balance, and thereby it will alert you regarding any kind of errors or omissions that might occur during your bookkeeping sessions.
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On the contrary, a single entry system will definitely not allow bookkeepers to do checks and balances. While there is so much discussion going on about the amount that should be charged from the clients, the way they should be managed, things to be said, etc. A lot of this comes from the fact that business owners just simply are not aware of or they do not understand the significance or importance of a well maintained bookkeeping system. Intelligent and far sighted business owner know that all businesses need some sort of a basic bookkeeping system.
