In this unit we are going to look at a simple way of making a preliminary check on the accuracy of the entries made in the ledger. We will do this by balancing the accounts and then drafting a trial balance. We will start, however, by demonstrating how the folio column in the ledger can be used to provide a reference system for all the double entries. Such a system helps to speed up the process pf checking that all the double entries have been completed correctly.

Expenses are payments all businesses will have to make for a number of benefits and services they receive but which do not directly provide an asset owned by the business.
Discount is an expense which many firms incur in order to encourage prompt payment from their debtors.
Bad debt is the expense incurred when debtors fail to pay their debts.
Depreciation is the expense incurred when one of the fixed assets owned by a business falls in value.
Incomes are such receipts of money which come from sources other than sales of stock.
Discount received is a reduction in the amount that has to be paid rather than an actual physical receipt of money.

Double-entry bookkeeping is more robust. It follows the principle that every transaction affects at least two accounts, and they are recorded as debits and credits. For example, if you make a sale for $10, your cash account (assets) will be debited (increased) for $10 and your sales account (assets) will be credited (decreased) by the same amount. In the double-entry system, the total credits must always equal the total debits. When this happens, your books are “balanced.”

Using the double-entry method for bookkeeping makes more sense if your business is large, public, or buys and sells on credit. Enterprises often choose the double-entry system because it leaves less room for error. In a way, it ‘double-checks’ your books because each transaction is recorded as two matching but offsetting accounts.

Why bookkeeping is it important?

Bookkeeping is the process of recording your company’s financial transactions into organized accounts on a daily basis. It can also refer to the different recording techniques businesses can use. Bookkeeping is an essential part of your accounting process for a few reasons. When you keep transaction records updated, you can generate accurate financial reports that help measure business performance. Detailed records will also be handy in the event of a tax audit.

Accounting is at least the second oldest profession in the world. But while earlier professionals rapidly got to grips with basic techniques and even introduced refinements, it is remarkable that generations of tax collectors and merchants staggered on for thousands of years before finding a satisfactory general method of keeping a record of their affairs.