Importance of bookkeeping
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This document discusses the importance of bookkeeping for businesses. It defines accounting and bookkeeping, noting that bookkeeping involves systematically recording financial transactions and is a key part of accounting. Maintaining proper bookkeeping provides answers to important business questions about resources, liabilities, equity, revenues and expenses. It enables balanced budgeting and financial planning. The components of a good bookkeeping system include source documents, books of original entry, general ledgers, financial statements and subsidiary ledgers. Sample books, ledgers and financial statements are presented to illustrate a bookkeeping system. Overall, the document emphasizes that a proper accounting system is essential for business success through profit maximization and loss minimization.
Importance of bookkeeping
- 1. Importance of Bookkeeping in Your Business Presented by: Efferson P. Ramirez Senior Auditor
- 2. Introduction to Accounting and Bookkeeping Traditionally, Accounting is defined as the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which in part at least of a financial character and interpreting the results thereof.
- 3. Basic Definition of Accounting As to Function: Accounting is a service activity. It provides quantitative information primarily financial in nature, about economic entities that is intended to be useful in making economic decision.
- 4. Basic Definition of Accounting As to Purpose: Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of information.
- 5. Accounting versus Bookkeeping Bookkeeping can be considered as a procedural/mechanical/ technical element of accounting. It is the systematic and chronological recording of transactions and events. Development and maintenance of record are also its concern.
- 6. Importance of Bookkeeping Bookkeeping will provide ??? present answers to basic questions in your small business such as:
- 8. Importance of Bookkeeping Or are you incurring liabilities?
- 9. Importance of Bookkeeping Are you improving your Equity Standing? It is the residual interest of the owner/s in the assets of the entity after deducting its total liabilities.
- 10. Importance of Bookkeeping Are you earning at least fair revenues?
- 11. Importance of Bookkeeping Or you are paying too CAS HV OU C much H ER P ay ee : JHA MM ING expenses? Sup S plie s P5,0 00. 0 0
- 12. Importance of Bookkeeping Bookkeeping will provide ???? answers to basic questions in your business evaluation and planning:
- 13. Importance of Bookkeeping • Where are you now? • Where do you need to be?
- 14. Importance of Bookkeeping So a well maintained bookkeeping system will enable you for balanced Budgeting or Financial Planning as a means of working to quantify your Vision, Mission, Goals and Objectives
- 15. So Proper Bookkeeping will provide you correct: OBJECTIVES AND STRATEGIES
- 16. Without Proper Bookkeeping you will become:
- 17. PRACTICING CORRECT BOOKKEEPING WHICH IS THE KEY TO FINANCIAL PLANNING SHALL LEAD YOU TO CORRECT PATH TOWARDS SUCCESS IF PAIRED WITH REGULAR REVIEW PROCESSES.
- 18. What are the components of a good bookkeeping system? 2.Source Documents such as Official Receipts, Cash Vouchers and Others 3.Books of Accounts such as Cash Receipt Book, Cash Disbursement Book, General Journal, General Ledgers and Others 4.Subsidiary Ledgers andSchedules 5.Financial Statements as End products.
- 19. THE GENERAL ACCOUNTING SYSTEM Cash Receipts Cash disbursements Non-Cash Transactions Credit Transactions Cash/Check Purchase Invoice Official Journal Vouchers Source Documents Disbursement & Sales Invoice Receipt (JV) Vouchers (CDV) Cash Other Cash Receipt Disbursement General Journal (GJ) Journals (PJ, Books of Original Journal (CRJ) Journal (CDJ) SJ) Entry Book of Final Entry General Ledger Subsidiary Financial Ledgers Statements
- 20. SAMPLE CASH RECEIPT BOOK DATE PARTICULARS REF CASH IN SERVICE (DR.) REVENUE (CR.)
- 21. SAMPLE CASH DISBURSEMENT BOOK DAT PARTICULARS RE CASH TRANSPORTATIO RENT SUPPLIES E F OUT N (DR.) (DR.) (DR.) (CR.)
- 23. Mary's Massage Service Balance Sheet As of January 31, 2011 ASSETS CURRENT ASSETS Cash 12,000.00 Accounts Receivable 5,000.00 Supplies 2,000.00 TOTAL CURRENT ASSETS 19,000.00 NON-CURRENT ASSETS Office Equipment 12,000.00 Building Improvement 20,000.00 TOTAL NON-CURRENT ASSETS 32,000.00 TOTAL ASSETS 51,000.00 LIABILITIES AND CAPITAL LIABILITIES Accounts Payable 12,000.00 Unearned Revenues 3,000.00 TOTAL LIABILITIES 15,000.00 CAPITAL Mary Smith, Capital 36,000.00 TOTAL LIABILITIES AND 51,000.00 CAPITAL
- 24. Mary's Massage Service Income Statement For the Month Ended January 31, 2011 REVENUES Service Revenue 36,100.00 LESS EXPENSES Salaries Expense 3,000.00 Transportation Expense 500.00 Supplies Expense 3,000.00 Rent Expense 2,500.00 Utilities Expense 300.00 Telephone Expense 200.00 Advertising Expense 100.00 Total Expenses 9,600.00 NET INCOME 26,500.00
- 25. So….. A proper accounting or bookkeeping system is essential to any business whether big or small in order to manage its daily functions and keep the business running successfully. For any successful business, the main obligation is to maximize profits, minimize any loss and at the same time maintain its position as a responsible person or entity within the society. Let us hear from you if we could be of help in your bookkeeping needs!
- 26. THANKS & GOD BLESS!!!
Editor's Notes
- #2: EPRAMIREZ SEMINAR-REVIEW ON SIMPLIFIED ACCOUNTING