Process of Book-Keeping:
Introduction:
The process of book-keeping can be compared to the construction of a three-storeyed building.
In the construction of a three-storeyed building, first, the ground floor or the first storey is constructed. After the construction of the ground floor or the first storey, the first floor or the second storey is built. After the first floor or the second storey is built, after making quite sure that the foundation, the ground floor and the first floor are strong enough to support one more floor or storey, the top floor or the third storey is constructed.
Similarly, in the process of book-keeping, first, the business transactions are recorded either in a single book of original entry or first entry called the journal, general journal or ordinary journal, or in many books of original or first entry called the subsidiary books or the special journals. After the transactions are recorded either in a single journal or in many subsidiary books, the entries in the journal or the subsidiary books are posted (i.e., transferred) to appropriate accounts in the book of second entry or final entry called the Ledger. After the ledger accounts are prepared, after making sure about the arithmetical accuracy of the entries in the ledger accounts, through the preparation of a trial balance, from the ledger balances found in the trial balance, two final accounts, viz., (a) the trading and profit and loss account and (b) the balance sheet, are prepared to know the net profit or the net loss of the business for the accounting year, and the financial position of the business as on the last day of the accounting year.
Introduction:
The process of book-keeping can be compared to the construction of a three-storeyed building.
In the construction of a three-storeyed building, first, the ground floor or the first storey is constructed. After the construction of the ground floor or the first storey, the first floor or the second storey is built. After the first floor or the second storey is built, after making quite sure that the foundation, the ground floor and the first floor are strong enough to support one more floor or storey, the top floor or the third storey is constructed.
Similarly, in the process of book-keeping, first, the business transactions are recorded either in a single book of original entry or first entry called the journal, general journal or ordinary journal, or in many books of original or first entry called the subsidiary books or the special journals. After the transactions are recorded either in a single journal or in many subsidiary books, the entries in the journal or the subsidiary books are posted (i.e., transferred) to appropriate accounts in the book of second entry or final entry called the Ledger. After the ledger accounts are prepared, after making sure about the arithmetical accuracy of the entries in the ledger accounts, through the preparation of a trial balance, from the ledger balances found in the trial balance, two final accounts, viz., (a) the trading and profit and loss account and (b) the balance sheet, are prepared to know the net profit or the net loss of the business for the accounting year, and the financial position of the business as on the last day of the accounting year.
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