How to Keep Bookkeeping Records

How to Write up your Books of Prime Entry

Where to Start
There are 4 basic financial transactions involved in this procedure:

  • Cash received.
  • Cash paid.
  • Goods and services sold.
  • Goods and services purchased.

Each transaction has a source of some sort, which is usually a document such as a cheque butt, a bank deposit slip, a sales invoice or a supplier's invoice. These documents provide the primary information from which the data is entered into these books of prime entry.

What are the Rules for Transactions?
When recording transactions in the books of prime entry there are certain rules to follow:

  • Rule 1: Every debit must have a corresponding credit. The individual entry for a transaction must have a corresponding debit, as well as a credit, to verify that transaction.

  • Rule 2: All debits need to equal credits. The total of the debit columns of each account must equal the total of the credit columns.

  • Rule 3: Every entry must have details as well as the date they occurred. As the books become a permanent record they must be dated, as well as fully detailed.

".. the basic law of bookkeeping is that every debit must have a corresponding credit"

What do Bookkeeping Records Accomplish?
A good record-keeping system can affect the survival or failure of a new business. Businesses that have been operating for some time can increase their chance of staying in business or being profitable by ensuring the accuracy and efficiency of their record keeping.

This is because good records will keep you in touch with your operations and will highlight any problem areas, enabling you to put in place procedures to correct problems before disaster occurs.

Good bookkeeping records help accomplish the following:

  1. All your stocks will be fully recorded and monitored, so you are not left with obsolete or deteriorating stock.

  2. A good record system will enable you to control your expenditure.

  3. A good record system will enable all your payroll costs to be recorded, as well as provide the information necessary to meet the requirements for taxation matters to the Tax Department.

  4. A good record system will quickly indicate the level of profit a business is making at any time, from sales, and enable losses to be avoided if the information extracted highlights problem areas.

  5. Good bookkeeping records will provide reports on cash availability both on hand and in the bank, and highlight potential problems arising in the future, due to cash shortages.