Bookkeeping is a task concerned with the recording of financial data relating to business operations in a significant and orderly manner. It envelopes all the procedural aspects of accounting work and embraces record-keeping function. There are different types and methods of bookkeeping which are practised in managing books of accounts.
Different Bookkeeping System
1.Single-entry bookkeeping system
This bookkeeping system is used for businesses who have small or easier financial transactions. The single-entry system records cash sales and business expenses that are paid when incurred. This system can be difficult because bookkeeping entries under this system don’t match transactions to corresponding accounts, thus its revenues and expenses are hard to trace.
To solve this, this system uses a cash sales journal, cash disbursements journal and a record of bank statements. Once a revenue is received, it is recorded in the cash sales journal and recorded in the disbursement journal once the expense is paid. This recording will then reconcile with the bank account transactions.
2.Double-entry bookkeeping system
Compared to the single-entry system, this system is used for businesses who have more and complex financial transactions. Double-entry system posts single transactions as an income or expense item then create a second entry to trace the transaction to a corresponding account. This system also uses debits and credits, which will be the basis for knowing the increases and decreases to each account affected by the business’s financial transactions.
3.Use of bookkeeping software
With the rise of modern technology nowadays, many business owners are starting to use bookkeeping software to track their financial transactions. These programs require you to enter and post your financial transactions and at the same time, it is user-friendly. Popular programs such as Quickbooks and Sage uses the double-entry system, however, you don’t need to be experienced in using the system to use this software programs. There are also free bookkeeping software programs available online – for premium software programs, you can purchase it online or in cloud versions.
4.Use of virtual bookkeeping
For business owners who want to focus on other aspects of their business, the mentioned types above may be difficult for them to handle- thankfully, there are virtual bookkeeping services available. These services will help you save money- you don’t need to pay for their compensation and benefits compared to having an in-house bookkeeping employee. They also accept financial records electronically- from invoices, receipts etc. To keep you updated, they will also send you a monthly or quarterly report of all your transactions.