Proper accounting is a must for any emerging business. Following a good accounting practice make the overall management of the business very easy. Accounting is based on certain principles. These rigid rules make accounts consistent for all transactions involved. There are five major books of accounts. They are :
- Cash Book - Records all cash related transactions for a specified period.
- Bank Book - Records all bank related transactions for a specified period.
- Journal Book - Records all transactions, which are not cash or bank related.
- Purchase Book - All purchase related transactions are recorded here.
- Sales Book - All sales related transactions are recorded here.
Based on these books, a Trial Balance is prepared which shows the accuracy of accounting transactions involved. A Trial Balance has got two sides, Debit and Credit side. If sum total of Debit is tallied with the sum total of Credit side, then it shows that all transactions are recorded properly. These two sides are tallied only when the double entry concept is followed. Double entry concept stipulates that for every Debit amount, there must be a Credit amount.
In modern day business, Accounting software is used to record these transactions. These are commonly known as Accounting Packages. These Accounting Packages are built on the Accounting principles. These accounting packages make the whole accounting process very simple and integrated. One or more persons can work at a time. A data entry operator may be entering the data and a higher authority can approve it. Thus, the management can analyze the whole accounting process with ease.
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