What are the three types of bookkeeping?

by admin
What are the three types of bookkeeping?

If you think about the traditional way of Bookkeeping Adelaide, then it was done using one of two systems. Accountants used to calculate company books manually. The financial statements were prepared with respect to the regulations laid out by the government. The traditional two types of bookkeeping are still in existence.

With the introduction of digital technology, another way of bookkeeping has been introduced. It is storing the accounting details and bookkeeping in the computer systems. It has made accounting very easy as the storage and retrieval of information are very easy.

Three major types of bookkeeping are as follows.

Single-Entry System

What is a single-entry bookkeeping system? It is used for businesses that have uncomplicated or minimal transactions.

In this case, cash sales and business expenses that are paid when incurred are recorded in the system.

The system is not useful for businesses that have accounts receivables, accounts payables or a large number of capital transactions.

In this method of bookkeeping, entries do not match transactions to the corresponding account. Therefore, tracing revenues and expenses becomes difficult.

In short, the single-entry system of Bookkeeping Adelaide has a cash sales journal, a cash disbursements journal, and bank statements.

When revenue is received, the entry is made to the sales journal. When expense is paid, the entry is made to the disbursement journal.

When you reconcile with your bank account transactions, the journal entries should tally.

Double-Entry System

The double-entry system of Bookkeeping Adelaide is used for businesses that have more complex transactions routinely.

Some examples of the business are where income is collected through accounts receivables and receive merchandise and inventory on credit.

Here, a single entry is posted as income or expense. A second entry is created to trace the transaction to a corresponding account.

This system uses debits and credits, which is the standard language of accounting.

Bookkeeping Software

Many small-business owners use bookkeeping software to keep track of their financial activities. There are many proprietary packages available that use double-entry bookkeeping system. It is important to use a user-friendly system.

From basic to professional, several versions of the software exist.

The software used for Bookkeeping Adelaide is user-friendly and it can work on individual desktops, online, or even the cloud also. The choice of software depends on technical feasibility.

Bookkeeping is an essential element of the accounting system. Hence, it should be selected as per the requirement and needs of the business.

You may also like