The task of a bookkeeper is to ensure the record-keeping aspect of accounting and therefore to provide the data to which accounting principles are applied in the preparation of financial statements. Bookkeeping provides the basic accounting data by systematical recording such day-to-day financial information as income from the sale of products or services, expenses of business operations such as the cost of the goods sold and overhead expenses such as a rent, wages, salaries.
Modem accounting system is considered to be a seven-step cycle. Bookkeeping deals with the first 3 steps: 1) the systematic recording of financial transactions; 2) the transferring of the amounts from journals to the general ledger ("posting" step); 3) the drawing up of the trial balance.
Record keeping of companies is based on a double-entry system, due to which each transaction is recorded on the basis of its dual impact on the company's financial position. To make a complete bookkeeping record of every transaction in a journal, one should consider interrelated aspects' of every transaction, and entries must be made in different accounts to keep the ins (receipts) and outs (payments) balanced.
A typical account is known to have two sides: the items on the left side are called debits, while the items on the right side are credits.
Thus, double-entry bookkeeping doesn't mean that the same transaction is entered twice, it means that the same amount of money is always debited to one account and credited to another account, each record having its own effect on the whole financial structure of the company. Certain accounts are increased with debits and decreased with credits, while other accounts are increased with credits and decreased with debits.
In the second step the amounts from the various journals are usually monthly transferred to the company's general ledger – a procedure called posting. Posting data to the ledgers is followed by listing the balances of all the accounts and calculating whether the sum of all the debit balances agrees with the sum of all the credit balances. This procedure known as the drawing up of a trial balance and those that follow it usually take place at the end of the fiscal year. By making a trial balance, the record-keeping accuracy can be checked. When the trial balance has been successfully prepared, the bookkeeping portion of the accounting cycle is completed.
The double-entry system of bookkeeping enables every company to determine at any time the value of each item that is owned, how much of this value belongs to creditors, the total profit and how much belongs to the business clear of debt. Thus, one advantage of the double-entry system is that its information is complete enough to be used as the basis for making business decisions. Another advantage is that errors are readily detected, since the system is based on equations that must always be in balance.
Ex. 1Find pairs of synonyms in A and B.
A: ensure, provide, dual, complete, enter, impact, detect, error;
B: double, record, guarantee, full, supply, mistake, effect, find.
Ex. 2 Find pairs of antonyms in A and B.
A: debits, receipts, systematic, various, total, certain;
B: irregular, same, credits, unspecified, payments, incomplete.
Ex. 3 Match upnumbers and letters.
1. The preparation of a trial balance includes
2. A special book known as a journal is used
3. Double-entry bookkeeping is a system of recording accounts where
4. The posting procedure consists of
5. In bookkeeping a sum of money paid or owed by a business
6. One should know that crediting means
7. Unlike crediting the debiting procedure means
8. Bookkeeping as part of the accounting cycle deals with
9. A bookkeeper is sure to be fully responsible for
10. The sum of money gained by a business
a. recording in an account a sum of money paid out or still owed.
b. regular transferring entries from the journal to the appropriate
accounts in the ledger.
c. for recording all primary information on any business transaction.
d. the accurate performance of the first steps in the accounting cycle.
e. is recorded on the right-hand side of a list of accounts.
f. recording all money received by and paid out of a company in special books or computer files.
g. the checking of accounts by comparing the total credits with the
total debits.
h. is shown on the left-hand side of a list of accounts.
i. each sale or purchase is shown as having an effect on both the debit and the credit columns of an account.
j. recording the payment of a sum of money into an account.
Ex. 4 Answer the following questions.
1. What kind of information is of great importance for proper company
management?
2. What role does bookkeeping play in the accounting cycle?
3. What kind of data is collected by a bookkeeper?
4. What tasks should a bookkeeper solve at the first three steps of the
accounting cycle?
5. What does double-entry bookkeeping mean?
6. What data are recorded in the company's general ledger?
7. When is the bookkeeping cycle considered to be completed?
8. What are the advantages of the double-entry system?
Ex. 5Translate the text.