Friday, November 24, 2017

Old Bookkeeping Methods, Part 1.

Every business whether large or small should keep a correct record of its activities and to facilitate the keeping of such record the science of bookkeeping has been evolved until today a well kept set of books will reveal every transaction of business down to the smallest detail. 

There are two kinds of bookkeeping commonly called single and double entry. 

Single entry method of keeping books is very unsatisfactory and the practice is rapidly disappearing as it has no advantages.  Books commonly used are the Day Book, Cash Book and Ledger. 

In the Day Book all transactions other than cash receipts and disbursements are entered daily with no regard as to debits and credits. 

Cash Book is used to record all transactions where cash is involved. Receipts being entered on the left side and disbursements on the right, difference between the total on left and that on the right side representing cash on hand and in bank. 

Ledger is used to keep a record of customers and creditors, few if any other accounts being kept, such as Inventory, Machinery, Expenses, etc. 

With this method in use it is impossible to balance books, locate errors, guard against embezzlement or theft, arrive at cost of doing business and numerous other elements which have an important bearing in a well conducted business. 

A Double entry system requires the keeping of an account with every element of the business, not only of the assets and liabilities, but also the Expense, Merchandise and Profit and Loss. Every debit must have an equivalent credit and vice versa. In this manner a balance is maintained.

Previous entry: How To Collect Debts Next entry coming soon - pester sumosalesman@aol.com to let him know you read this!

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