Knowledge On Bookkeeping And Accounting Is Essential

Bookkeeping is usually looked at as that necessary evil that must be done to comply with legal requirements. Entrepreneurs prefer to focus on marketing and operational concerns rather than be bothered by the tedious recording of transactions. There are also those who know just enough to read financial statements like the balance sheet and the income statement.

Still, it is best to also learn bookkeeping to be able to check how satisfactory the recording is; otherwise, the financial statements could be unreliable and your company may not only be misguided by erroneous data but also suffer penalties from wrong filings.

While mastering Accounting requires a lot of time and effort, you do not need to be a CPA to learn the basic concepts and procedures that will be useful to your effort to understand your business. Here are some of the terms/concepts a beginner should learn on the topic:

Bookkeeping. The recording of the companies’ financial activities.

Accounting. The creation and analysis of reports from information gathered f rom bookkeeping. Bookkeeping is considered as only
a part of accounting.

Accrual basis accounting. This means that earnings are recorded when they are earned, even if payment has not been received yet. Also, expenses are recorded when they are incurred even if the company has not yet been paid.

Accrual basis accounting is the opposite of cash basis accounting where only cash sales and paid expenses are recorded.

Double entry bookkeeping. A system of recording financial transactions where at least two nominal accounts are changed per transaction.

Debit. An entry in the left side of an account, journal or ledger.

Credit. An entry in the right side of an account, journal or ledger.

Asset. An item of economic value owned or controlled by the company.

Liabilities. The debts or obligations of the business to everyone including the owners or stockholders of the business.

Journal. The books where financial transactions are originally entered. There are usually at least three journals used—the general journal, the sales journal and the purchases journal.

Ledger. The book of account where transactions recorded in the journals are consolidated to specific accounts. Like the journal, there are several types of ledgers.

Balance sheet. A financial statement that shows the amount of a company’s assets, liabilities and ownership at a given point in time. It is called a balance sheet because the assets must equal the amount of the liabilities and ownership.

Income statement. A financial statement that shows the company’s financial performance for a specific period of time. Here you can see the profit or loss of the company.

Knowledge of bookkeeping and accounting are essential to running a business properly. Learning the fundamental principles and procedures is possible even for non-accountants.

To know more about this topic, BusinessCoach, Inc., a leading business seminar provider, conducts a seminar entitled, “Bookkeeping and Basic Accounting for Non- Accountants.” Contact (02) 727-5628, (02) 727-8860, (0915) 205-0133 or visit www.businesscoachphil.com for details.

Click here to view details of the seminar: Bookkeeping and Basic Accounting for Non-Accountants »

*Originally published by the Manila Bulletin. C-4, Sunday, February 24, 2013. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.