What is Bookkeeping and How it works?

History of Bookkeeping

 

An organization is involved in a lot of transactions. They are both monetary and non-monetary. The concept of bookkeeping was invented by a monk named Luca Pacioli. He is regarded as the father of accounting. But when we talk about accounting there are always two aspects to it. The concept of accounting began with the single entry system. So Luca Pacioli is the first person to invent the double entry accounting system that has the concepts of debit and credit. That is how double entry bookkeeping came into existence.

What is bookkeeping?

Bookkeeping is the process of managing the financial transactions of a business or any such establishment by recording, classifying and summarising the books of accounts of an individual or business.

But before we talk any further about bookkeeping, it is important that you understand that both bookkeeping and accounting are two different things.

Bookkeeping vs. Accounting:

Many people have accounting confused for bookkeeping. So we will quickly see the difference between accounting and bookkeeping.

Accounting is a broader process while bookkeeping is just a part of it. Every accounting process begins with bookkeeping. This means that accounting is incomplete, or in other terms, accounting itself isn’t possible without bookkeeping. While an accountant takes care of the accounting functions, there is a separate person called the bookkeeper to take care of the bookkeeping activity of the business. So to understand the functions of bookkeeping you simply have to understand the role of a bookkeeper in business.

Role of a bookkeeper:

• Every company will require a unique accounting system depending on the type and the quantum of activities that are prevalent in that organization. So it is the role of the bookkeeper to keep in mind the requirements of the business and design an accounting system accordingly.
• The bookkeeper maintains a separate journal or a book to maintain the details that are similar in nature that is what is the motto of classifying. He classifies them under different heads that will assist in passing the right accounting treatment. These journals are also known as subsidiary journals.
• He is responsible for holding the documents and invoices and filing them properly and maintaining a proper record. Filing these documents on a regular basis will not only help the accountant but will also help the bookkeeper to furnish the required details to various other departments as and when they require.
• Bookkeeper apart from having accountancy knowledge must also possess knowledge about the rule and regulations of the state which will help him maintain data accordingly. A slip in the work of the bookkeeper will lead unwarranted consequences and will put the whole firm into trouble.