Book keeping in accounts is the systematic recording of business transactions in appropriate books of accounts in a planned way so that an accountant can easily perform legal and tax management in a timely manner, accountant can give the party account to the owners immediately, accountant can make the balance sheet immediately when required, accountant can give the stock statements.
Book keeping is the most important part of any business. A skilled and compliant bookkeeper should be able to produce financial records that give business accurate information about its financial activities. These records are critical to the future success of any business. Not only are these records necessary for the business, they are also required by law. Today most of the companies are using accounting software for book keeping. Here we will teach you book keeping manually or you can use the accounting software.
We, herewith, teach you the book keeping process so that you can run your own business or do the accounts job. The purpose is that you must know the process of book keeping.
Bookkeeping doesn't only mean the recording of transactions in a systematic way but it is the maintaining the filing of transaction records e.g., your invoices filing, purchase bills, electricity bills, telephone bills, tax payment receipts, all need to be put in proper file.
We will start with a story of a person, Mohan who want to start a yarn manufacturing unit in India with three partners, Yogesh , Gurmeet and Paramjit with all the four will have 25% share. They have decided to invest Rs. 10 lac each. They have installed their factory at a rental place at lease rent of Rs.10000/- per month. Machinery cost is Rs. 2000000/-, Electricals and fittings cost is Rs. 200000/- and they have arranged a working capital limits from a commercial bank amounting to Rs.2000000/-. The name of the company is decided as Gobind Woolens. Let the factory started the production on 1.6.2017.
All the partners have decided to use a software for accounting and maintain a day book which is a common for cash and journal entries. They have also decided to issue a voucher of each transaction daily and then that voucher will get entered in the day book and then to the accounting software. Now they need to get vouchers printed for daily entries, a purchase file, Electricity Bill file, Telephone / mobile bill file, sale invoices bill file, file to keep daily vouchers, other purchases file and raw material purchase.
Every company maintains the accounts to evaluate their profits/losses, maintain stocks, maintain the list of debtors and creditors, maintain their tax liabilities and they are bound to maintain records also for Govt. Departments. Companies have to show their records any time if asked by Income tax or GST or any other department.
To start accounts purchase some files for records.
Electricity Bill file
Telephone / mobile bill file
sale invoices bill file
file to keep daily vouchers
other purchases file
Raw material purchase file
To start writing accounts we will use a journal voucher , a day/cash book and a software for accounting. I will not here explain particular software but you can use any software. I will try to explain to use manual ledger also. The purpose is to know the basic accounting principles.
Let us say we started accounts on 1.7.2017 and received four cheque of Rs.10,00,000 each from all the three partners and Rs. 10000 cash from Mohan (Parter)
Entries to be done on 1.7.2017:
1. Cheques of Rs.1000000 received from all the four partners
2. Cash Rs. 10000 received from partner Mohan
3. Rs. 200000 invoice received from Gambhir Machinery for Machinery purchase
4. Cheque issued to Gambhir Machinery for Rs. 2000000.
5. Freight paid for machinery Rs.4000
6. Office expenses of Tea Rs. 200
After journal entries are made, the next step in the accounting cycle is to post the journal entries into the ledger. Posting refers to the process of transferring entries in the journal into the accounts in the ledger.
RULES FOR POSTING IN TO LEDGER
Posting the entries from day books to ledger is very important work. An accountant must keep in his mind the following rules while posting the entries:-
All entries to be posted from the day book
Posting of the entries must be date wise.
Date of entry in day books must be the date of entry in ledger.
All amounts shown in debit side in journal must be posted in debit side of a particular account. In 'particulars' column of ledger, the account head must start with 'To'.
All amounts shown in credit side in journal must be posted in credit side of a particular account. In 'particulars' column of ledger, the account head must start with 'By'.
After the entry, page number of journal from where the entry is posted, must be written in L/F column of account and the page number of ledger account must be written in L/F column of journal or day book.
1. Make an index of All the accounts (As in Image)
2. Maintain each account on single page
3. Post debit entries on debit side and credit entries on credit side.
Stock register is a register used to maintain company's stocks. It is a daily based system of maintaining inventory by updating daily purchase (incoming Stock) and subtracting sales(Outgoing stock). In a manufacturing units Production of finished goods and raw material issued for production are also maintained. Stock registers are maintained quantitatively.
Stock register is the most important part of accounting. It, not only help in getting closing stock value but in maintain the product data also.
There are mainly two methods of maintaining stocks.
1. Manual Stock register
2. Accounting Software
Manual Stock Register
Every sale and purchase entry from the daybook (if you are entering sale and purchase entries in day book also),purchase register and sale register is to be entered in stock register.
Each item of stocks to be maintained on separate page of stock register. First of all an index is made with item and page number.
Production and issued for production are also maintained in separate columns so that its total gives you the monthly production also.
In Case of Accounting Software
Sales and purchase automatically goes to stock registers. When You issue invoice you sect party name and the stock item, these are automatically entered in the sale book, ledger and the stock register.
For purchase you are to use the purchase voucher to enter the raw material or stock purchases, because purchase voucher is attached with the stock register.
Performa of manual Stock Register