Bookkeeping

BOOKKEEPING

Fundamentals

• Bookkeeping rests on and revolves around exactly two Accounting Equations :-
  • Equity = Assets - Liabilities
  • Profit = Revenue - Expenses

Implementation

• Bookkeeping refers to the recording of entries into :-
  • General Ledger (GL); comprising the (multi-level) breakdown into various levels of Sub-Ledgers and ultimately Accounts of the 6 elements (or more commonly, 5 elements, as Profit typically does not need to be broken down, and can be computed readily) of the two Accounting Equations.
  • General Journal, comprising the (multi-level) breakdown into various levels of Sub-Journals and ultimately Transactions. Each Transaction comprises date, description, GL Account(s)/amount(s) to Credit, and GL Account(s)/amount(s) to Debit.