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Keeping Books

2 min. read

Business bookkeeping is based on a transaction, a financial event that involves the exchange of value. It may be an exchange of money for service, the purchase of an asset, payment on a loan, investment into a business, payment of expenses, collection of accounts receivable or any number of other events.

Record Keeping Cycle

In double-entry accounting, a business transaction occurs, and documents are generated. The entry for the transaction is recorded in a journal and then posted to the individual accounts. At the end of a financial period, these account balances are used to prepare financial statements. Most businesses work on a monthly financial period, and this will be assumed in the following discussion.

The Monthly Financial Cycle

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