Definition: Bookkeeping
What is Bookkeeping?
Bookkeeping is the process of recording financial transactions in a Journal in chronological order. The business's bookkeeping journal provides an accounting (retelling) of the business's events over time. Financial transactions recording in bookkeeping include owner investments, purchases from vendors, customer sales and loans. All of these events are recorded in the business's bookkeeping Journal in a similar way as to how you would record a life event in a personal journal. When a bookkeeper records a financial transaction, the bookkeeper will "make a bookkeeping journal entry".
In order to efficiently interpret a business's bookkeeping Journal entries, each bookkeeping entry is sorted into account categories. For example, if a business purchased $500 of worth of pens, the pens could be sorted to a Supplies account. An account is just a group/category of like items that were recorded in the bookkeeping.
All the account categories combined as one group is referred to as the business's General Ledger of Accounts. A simple listing of the bookkeeping accounts contained in the General Ledger of Accounts is called the business's Chart of Accounts. The General Ledger also gives an accounting of the business's bookkeeping transactions, but does so according to account categories. For example, the Supplies account would give an accounting of business supplies as recorded in the bookkeeping. The word accounting means to retell a story and bookkeeping is the process of recording the entries.
Once a bookkeeper has recorded entries in a business's journal and they have been sorted to the General Ledger of Accounts, an accountant can interpret the results and create accounting financial statements that describe trends like cash flow, net profit and owner's equity.
In order to efficiently interpret a business's bookkeeping Journal entries, each bookkeeping entry is sorted into account categories. For example, if a business purchased $500 of worth of pens, the pens could be sorted to a Supplies account. An account is just a group/category of like items that were recorded in the bookkeeping.
All the account categories combined as one group is referred to as the business's General Ledger of Accounts. A simple listing of the bookkeeping accounts contained in the General Ledger of Accounts is called the business's Chart of Accounts. The General Ledger also gives an accounting of the business's bookkeeping transactions, but does so according to account categories. For example, the Supplies account would give an accounting of business supplies as recorded in the bookkeeping. The word accounting means to retell a story and bookkeeping is the process of recording the entries.
Once a bookkeeper has recorded entries in a business's journal and they have been sorted to the General Ledger of Accounts, an accountant can interpret the results and create accounting financial statements that describe trends like cash flow, net profit and owner's equity.
Continue Learning in an Interactive-Accounting Textbook
Over 4+ Hours of Free Lessons
The Addictive Accounting training course has a purpose:
To help you quickly master the fundamentals of bookkeeping and accounting!
If you are a student who is planning on studying accounting, or a student who is struggling to learn the concepts, this course is for you. If you want an A grade, take this prep course! If you are business owner who wants to fully understand their personal bookkeeping, this course is also for you.
To help you quickly master the fundamentals of bookkeeping and accounting!
- Simplified - created for students and business owners
- Comprehensive - an interactive bookkeeping and accounting textbook
- Practice Make Perfect - in a hands-on bookkeeping simulator
- Learn Finance - cash, profit, equity, and balance statements
- Quiz Yourself - test your comprehension with instant feedback
- Career Boost - communicate finance with confidence
- At Your Pace - complete the course in a week or a weekend
- Teacher's Aid - can be used as an auxiliary tool to enhance learning
- CPA Exam Prep - review fundamentals to greatly improve your score
If you are a student who is planning on studying accounting, or a student who is struggling to learn the concepts, this course is for you. If you want an A grade, take this prep course! If you are business owner who wants to fully understand their personal bookkeeping, this course is also for you.
Practice Bookkeeping in a Bookkeeping Simulator
Rather than just read about bookkeeping and accounting, learn and practice bookkeeping by yourself in a hands-on bookkeeping simulation. Learn more about our accounting simulation app and see what you can learn for free in the Addictive Accounting course.