Key Concepts in Bookkeeping

  • Bookkeeping: Process of recording business transactions methodically and chronologically.

  • Key Terms:

    • Bookkeeper: Individuals responsible for maintaining business financial records.
    • Book of Accounts: Includes Journal and Ledger.
    • Journal: Original entry book for recording transactions.
    • Ledger: Final entry book summarizing accounts.
    • General Journal: Basic journal format; includes date, account titles, and transactions.
    • General Ledger: Comprises all accounts reflected in financial activities.

  • General Journal Entry Example:

    • Date: June 25, 2020
    • Transaction: Cash received for services rendered by ABC Laundry Co.
    • Debit: Cash (P5,000)
    • Credit: Service Income (P5,000)

  • Accounts Receivable Ledger: Records credit sales and customer accounts.

  • Accounts Payable Ledger: Contains details of invoices from suppliers.

  • T-Account:

    • Format used for posting journal entries.
    • Left side = Debit (Value Received), Right side = Credit (Value Parted With).

  • Account Types:

    • Assets: Economic resources owned by a business.
    • Liabilities: Obligations of a business to pay debts.
    • Owner's Equity: Owner’s residual interest in assets.
    • Revenue: Income from operations.
    • Expenses: Costs incurred to generate income.

  • Debit and Credit Rules:

    • Assets increase with debits.
    • Liabilities and Equity increase with credits.
    • Revenue increases on the credit side, while expenses increase on the debit side.

  • Trial Balance: A summary listing of all ledgers, ensuring total debits equal total credits, prepared before financial statements.