Bookkeeping/Single-Entry Bookkeeping/Principles of Bookkeeping
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| Bookkeeping: Single-Entry Bookkeeping Principles of Bookkeeping |
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Contents |
[edit] Preliminary Remarks
[edit] Introduction
It is the intention to give the student, in this and the two following Sections, such a full and complete understanding of the theory and elements of single-entry bookkeeping as will enable him to keep, by this method, books for any kind of business to which the method is adapted. If the examples illustrated and explained are exactly and conscientiously followed, a valuable knowledge of business and bookkeeping will surely be acquired.
[edit] Bookkeeping and Its Uses
Books of account are kept, in some manner, by all persons doing business. This is done that they may know their resources and liabilities and also the extent of their business and its receipts and expenditures.
[edit] Bookkeeping
Bookkeeping is the systematic recording of the facts that will show the standing of a business. A bookkeeper, or accountant, is a person that understands how to make such records and how to prepare the bills, check, drafts, etc. necessary in mercantile transactions, and is acquainted with the manner which such instruments are used.
[edit] Methods of Keeping Books
There are two distinct methods of keeping accounts, called single-entry bookkeeping and double-entry bookkeeping.
All that is aimed at in strictly single-entry bookkeeping is to enable one party to keep an account of his dealings with others, in order that he may know how much they owe him and how much he owes them, none but personal accounts being kept. An entry is made only when a personal account is affected, and the person is simply debited or credited, hence the term single-entry. It is customary, however, to keep an account with Cash also, in order that the proprietor may know the amount of money that has been received and expended.
In some sets of books, double entry is combined with single entry to the extent that accounts are kept with Merchandise, Expenses, Freight, and Wages, for the purpose of showing how much merchandise was bought and sold and how much was paid out for expense. When such accounts are kept, they are simply balanced and ruled off at the time of closing the books for any business period.
In double-entry bookkeeping an account is kept with every class of property dealt in and with Expenses, etc., as well as with every person dealt with. A debit and credit entry is made for every transaction, thus making an entry to two or more accounts, according to the number affected by the transaction; that is to say, every time an account is debited, some other account must be credited for the same amount, hence the term double entry.
[edit] Rule for Debit and Credit
The two main principles of bookkeeping are debit and credit. If the following directions for debit and credit are strictly followed, a mistake will never be made.
When to debit---
- Cash: When you receive it.
- The person: When you trust any one.
- The person: When you pay any one.
When to credit---
- Cash: When you pay it out.
- The person: When he trusts you.
- The person: When he pays you.
