What is bookkeeping?

In the normal course of business, a document is produced each time a transaction occurs. Sales and purchases usually have invoices or receipts. Deposit slips are produced when deposits are made to a bank account. Cheques are written to pay money out of the account. Bookkeeping involves recording the details of all of these documents into multi-column journals. For example, all credit sales are recorded in the Sales Journal, all Cash Payments are recorded in the Cash Payments Journal.

After a certain period, typically a month, the columns in each journal are each totalled to give a summary for the period. These journal summaries are then transferred to their respective accounts in the ledger. The process of transferring summaries or individual transactions to the ledger is called Posting. Once the posting process is complete, accounts undergo balancing which is a process to arrive at the balance of the account.

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