Introduction To Accounting And Types Of Entry SystemsFinance Services
Accounting is one of the crucial part of accounting process that actually is the process of maintaining a proper record for the financial transactions. Usually the purchase, sale, payments by individual or even by the organization and receipts are included in transaction and the one who performs this duty of accurate recording is called bookkeeper. Day-to-day recording is entered in a “daybook” and the bookkeeper is expected to make it certain that all the entries are recorded in the very right daybook, customer ledger, supplier ledger and the general ledger. So, when it comes to the accountant, income statement and balance sheet are prepared on the basis of these ledgers and trial balance sheet provided by the bookkeeper.
Types of Entry Systems
There are basically two styles or types of accounting;
1.Single entry bookkeeping services in Perth
2.Double entry bookkeeping
Both of the said types differ at recording the transaction and have their own advantages and disadvantages.
Single Entry Accounting
As is vivid with the name that in this simplest form of record keeping of financial transactions, there is a single entry in transaction log or journal for each transaction.
This type of approach is much similar to that for a check register where the individual tracks the deposits, checks and balance for individual checking account. So, it is sufficient and preferred approach of record keeping for small business because
·It is simple
·It can be easily understood
·it can be implemented without the professional or trained bookkeeper
·It does not require highly sophisticated software etc
As it has been said earlier that it can be a great help for small businesses but not for those on a large scale because of the below mentioned reasons.
·It does not provide sufficient data to evaluate the financial position of the company
·It focuses on revenues and expenses only
·There is no error checking facility with single entry system
Double Entry Accounting
In process of double entry accouting, there are two entries made for each transaction that are credit entry for one account and the equal debit entry for the other account. So, it works on the duality principle that help to have the balance sheet in a way that increase in assets will be offset with the decrease in expense and vice versa and we get
Assets-Liabilities = Capital
this system of entry is a preferred approach of accounting for large business because;
·It gives correct information about the profit and loss
·It helps preparing the financial statement right from the accounts
·It has built-in error checking facility
Though it requires professional or trained bookkeepers but now a days, a lot of softwares are available that make the whole process quite easy, quick and more accurate.
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