Bookkeeping in the context of a business is simply the recording of financial transactions. Transactions include purchases, sales, receipts and payments by an individual or organization. Many individuals mistakenly consider bookkeeping and accounting to be the same thing. This confusion is understandable because the accounting process includes the bookkeeping function, but is just one part of the accounting process. The accountant creates reports from the recorded financial transactions recorded by the bookkeeper and files forms with government agencies. There are some common methods of bookkeeping such as the single-entry bookkeeping system and the double-entry bookkeeping system. But while these systems may be seen as "real" bookkeeping, any process that involves the recording of financial transactions is a bookkeeping process.
Bookkeeping is usually performed by a bookkeeper. A bookkeeper (or book-keeper), also known as an accounting clerk or accounting technician, is a person who records the day-to-day financial transactions of an organization. A bookkeeper is usually responsible for writing the "daybooks". The daybooks consist of purchases, sales, receipts, and payments. The bookkeeper is responsible for ensuring all transactions are recorded in the correct day book - suppliers ledger, customer ledger and general ledger.
The bookkeeping process primarily records the financial effects of transactions only. The variation between manual and any electronic accounting system stems from the latency between the recording of the financial transaction and its posting in the relevant account. This delay, although absent in electronic accounting systems due to instantaneous posting into relevant accounts, is a basic characteristic of manual systems, thus giving rise to primary books of accounts such as Cash Book, Bank Book, Purchase Book, and Sales Book for manually recording the immediate effect of the financial transaction.
In the normal course of business, a document is produced each time a transaction occurs. Sales and purchases usually have invoices or receipts. Deposit slips are produced when lodgements (deposits) are made to a bank account. Cheques are written to pay money out of the account. Bookkeeping involves, first of all, recording the details of all of these source documents into multi-column journals (also known as a books of first entry or daybooks). For example, all credit sales are recorded in the sales journal, all cash payments are recorded in the cash payments journal. Each column in a journal normally corresponds to an account. In the single entry system, each transaction is recorded only once. Most individuals who balance their cheque-book each month are using such a system, and most personal finance software follows this approach.
After a certain period, typically a month, the columns in each journal are each totaled to give a summary for the period. Using the rules of double entry, these journal summaries are then transferred to their respective accounts in the ledger, or book of accounts. For example the entries in the Sales Journal are taken and a debit entry is made in each customer's account (showing that the customer now owes us money) and a credit entry might be made in the account for "Sale of class 2 widgets" (showing that this activity has generated revenue for us). This process of transferring summaries or individual transactions to the ledger is called posting. Once the posting process is complete, accounts kept using the "T" format undergo balancing, which is simply a process to arrive at the balance of the account.
As a partial check that the posting process was done correctly, a working document called an unadjusted trial balance is created. In its simplest form, this is a three column list. The first column contains the names of those accounts in the ledger which have a non-zero balance. If an account has a debit balance, the balance amount is copied into column two (the debit column). If an account has a credit balance, the amount is copied into column three (the credit column). The debit column is then totalled and then the credit column is totalled. The two totals must agree – this agreement is not by chance – because under the double-entry rules, whenever there is a posting, the debits of the posting equal the credits of the posting. If the two totals do not agree, an error has been made either in the journals or during the posting process. The error must be located and rectified and the totals of debit column and credit column recalculated to check for agreement before any further processing can take place.
Once the accounts balance, the accountant makes a number of adjustments and changes the balance amounts of some of the accounts. These adjustments must still obey the double-entry rule. For example, the "inventory" account asset account might be changed to bring them into line with the actual numbers counted during a stock take. At the same time, the expense account associated with usage of inventory is adjusted by an equal and opposite amount. Other adjustments such as posting depreciation and prepayments are also done at this time. This results in a listing called the adjusted trial balance. It is the accounts in this list and their corresponding debit or credit balances that are used to prepare the financial statements.
Finally financial statements are drawn from the trial balance, which may include:
- the income statement, also known as the statement of financial results, profit and loss account, or P&L
- the balance sheet, also known as the statement of financial position
- the cash flow statement
- the statement of retained earnings, also known as the statement of total recognised gains and losses or statement of changes in equity
Entry systems 
Two common bookkeeping systems used by businesses and other organizations are the single-entry bookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping uses only income and expense accounts, recorded primarily in a revenue and expense journal. Single-entry bookkeeping is adequate for many small businesses. Double-entry bookkeeping requires posting (recording) each transaction twice, using debits and credits.
Single-entry system 
The primary bookkeeping record in single-entry bookkeeping is the cash book, which is similar to a checking (cheque) account register but allocates the income and expenses to various income and expense accounts. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory and travel expenses. These days, single entry bookkeeping can be done with DIY bookkeeping software to speed up manual calculations.
Sample revenue and expense journal for single-entry bookkeeping
|No.||Date||Description||Revenue||Expense||Sales||Sales Tax||Services||Inventory||Advert.||Freight||Office Suppl||Misc|
|1041||7/13||Printer- Advert flyers||450.00||450.00|
|1042||7/13||Wholesaler – inventory||380.00||380.00|
|– Taxable sales||400.00||32.00|
|– Out-of-state sales||165.00|
|– Service sales||265.00|
Double-entry system 
A double-entry bookkeeping system is a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different nominal ledger accounts.
A daybook is a descriptive and chronological (diary-like) record of day-to-day financial transactions also called a book of original entry. The daybook's details must be entered formally into journals to enable posting to ledgers. Daybooks include:
- Sales daybook, for recording all the sales invoices.
- Sales credits daybook, for recording all the sales credit notes.
- Purchases daybook, for recording all the purchase invoices.
- Purchases credits daybook, for recording all the purchase credit notes.
- Cash daybook, usually known as the cash book, for recording all money received as well as money paid out. It may be split into two daybooks: receipts daybook for money received in, and payments daybook for money paid out.
- General Journal daybook, for recording journals.
Petty cash book 
A petty cash book is a record of small value purchases before they are later transferred to the ledger and final accounts, it is maintained by a petty or junior cashier. This type of cash book usually uses the imprest system: a certain amount of money is provided to the petty cashier by the senior cashier. This money is to cater for minor expenditures (hospitality, minor stationery, casual postage and so on) and is reimbursed periodically on satisfactory explanation of how it was spent.
Journals are recorded in the general journal daybook. A journal is a formal and chronological record of financial transactions before their values are accounted for in the general ledger as debits and credits. A company can maintain one journal for all transactions, or keep several journals based on similar activity (i.e. sales, cash receipts, revenue, etc.) making transactions easier to summarize and reference later. For every debit journal entry recorded there must be an equivalent credit journal entry to maintain a balanced accounting equation.
A ledger is a record of accounts. These accounts are recorded separately showing their beginning/ending balance. A journal lists financial transactions in chronological order without showing their balance but showing how much is going to be charged in each account. A ledger takes each financial transactions from the journal and records them into the corresponding account for every transaction listed. The ledger also sums up the total of every account which is transferred into the balance sheet and income statement. There are 3 different kinds of ledgers that deal with book-keeping. Ledgers include:
- Sales ledger, which deals mostly with the accounts receivable account. This ledger consists of the financial transactions made by customers to the business.
- Purchase ledger is a ledger that goes hand and hand with the Accounts Payable account. This is the purchasing transaction a company does.
- General ledger representing the original 5 main accounts: assets, liabilities, equity, income, and expenses
Abbreviations used in bookkeeping 
- A/C – Account
- Acc – Account
- A/R – Accounts receivable
- A/P – Accounts payable
- B/S – Balance sheet
- c/d – Carried down
- b/d – Brought down
- c/f – Carried forward
- b/f – Brought forward
- Dr – Debit record
- Cr – Credit record
- G/L – General ledger; (or N/L – nominal ledger)
- P&L – Profit and loss; (or I/S – income statement)
- P/R - Payroll
- PP&E – Property, plant and equipment
- TB – Trial Balance
- GST – Goods and services tax
- VAT – Value added tax
- CST – Central sale tax
- TDS – Tax deducted at source
- AMT – Alternate minimum tax
- EBITDA – Earnings before interest, taxes, depreciation and amortisation
- EBDTA – Earnings before depreciation, taxes and amortisation
- EBT – Earnings before taxes
- EAT – Earnings after tax
- PAT – Profit after tax
- PBT – Profit before tax
- Depr – Depreciation
- Dep – Depreciation
- CPO – Cash paid out
Chart of accounts 
A chart of accounts is a list of the accounts codes that can be identified with numeric, alphabetical, or alphanumeric codes allowing the account to be located in the general ledger. The equity section of the chart of accounts is based on the fact that the legal structure of the entity is of a particular legal type. Possibilities include sole trader, partnership, trust and company.
Computerized bookkeeping 
Computerized bookkeeping removes many of the paper "books" that are used to record transactions and usually enforces double entry bookkeeping.