{"id":3833,"date":"2022-12-29T10:41:31","date_gmt":"2022-12-29T05:11:31","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=3833"},"modified":"2023-07-12T15:52:14","modified_gmt":"2023-07-12T10:22:14","slug":"what-is-bookkeeping","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-banking\/what-is-bookkeeping\/","title":{"rendered":"All You Need to Know About Bookkeeping"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Bookkeeping forms the foundation of all the financial processes of a business. Accurate bookkeeping is as important as finding the right strategy to turn an idea into a successful venture. <\/span><span style=\"font-weight: 400;\">Any mishaps in bookkeeping will set you up for a tremendous financial loss.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Managing your business finances can be daunting to new founders. But it\u2019s crucial to get the financial process sorted right from the start. <\/span><span style=\"font-weight: 400;\">Luckily, living in the era of the fintech revolution, businesses can <\/span><a href=\"https:\/\/razorpay.com\/x\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">automate their finances, end-to-end<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p>Every successful business owner needs to know what accounting is and how bookkeeping works, to ensure powerful, informed decision making.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d163540c24e\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d163540c24e\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-bookkeeping\/#What-is-Bookkeeping\" >What is Bookkeeping?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-bookkeeping\/#Bookkeeping-vs-Accounting\" >Bookkeeping vs Accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-bookkeeping\/#Single-Entry-vs-Double-Entry-Bookkeeping\" >Single Entry v\/s Double-Entry Bookkeeping<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-bookkeeping\/#Cash-Based-vs-Accrual-Based\" >Cash Based vs Accrual Based<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-bookkeeping\/#Bookkeeping-Back-in-the-Day\" >Bookkeeping, Back in the Day\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-bookkeeping\/#The-era-of-automation\" >The era of automation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-bookkeeping\/#Frequently-Asked-Questions\" >Frequently Asked Questions<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-is-Bookkeeping\"><\/span><b>What is Bookkeeping?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Bookkeeping is defined as keeping an accurate record of day-to-day financial transactions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Be it a kirana store or a unicorn; bookkeeping is important for businesses of every size &amp; revenue. It ensures that businesses stay up to date with their financial transactions &amp; assess where the business is heading.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It allows businesses to have a bird&#8217;s-eye view of their income &amp; expenditure at any specific point in time.\u00a0<\/span><\/p>\n<p><span style=\"font-size: 19px;\"><span style=\"font-weight: 400;\">In its entirety, bookkeeping is a record of <\/span><a href=\"https:\/\/razorpay.com\/learn\/what-is-accounts-payable-definition-process-and-more\/\" target=\"_blank\" rel=\"noopener noreferrer\">Accounts Payable<\/a><span style=\"font-weight: 400;\"> &amp; <\/span><a href=\"https:\/\/razorpay.com\/learn\/what-is-accounts-payable-definition-process-and-more\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Accounts Receivable<\/span><\/a><span style=\"font-weight: 400;\">.<\/span> To break it down in simpler terms, here are a few significant transactions that it keeps a record of &#8211;<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Purchase and sale of goods and services<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Petty cash inflow and outflow<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Monthly <a href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-expense-management-process-definition-automation\/\">expenses<\/a> like rent, electricity, salaries, taxes, etc<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Advances paid to any vendor or as loan to a third party<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Advances received from third parties\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">As a business grows, it becomes important to keep track of every rupee spent to accurately measure the performance of a business. Bookkeeping provides critical financial information that helps business leaders make strategic decisions &amp; alter their business plans to unlock new levels of revenue &amp; income.\u00a0<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_business_banking_what_is_bookkeeping&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Manage Your Business Finances on a Single Platform<\/a><\/div>\n<div>\n<h2><span class=\"ez-toc-section\" id=\"Bookkeeping-vs-Accounting\"><\/span><b>Bookkeeping vs Accounting<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">To put it in simple terms, bookkeeping is the starting point of accounting.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Traditionally, bookkeeping was limited to maintaining a company\u2019s book. A bookkeeper\u2019s job was to only record the transactions. An accountant\u2019s job, on the other hand, was to adjust the entries, analyse the data &amp; prepare comprehensive financial reports &amp; statements.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With the advent of <\/span><a href=\"https:\/\/razorpay.com\/learn\/finance-automation-definition-benefits\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">finance automation <\/span><\/a><span style=\"font-weight: 400;\">software, managing bookkeeping &amp; accounting is no more a two-person job. Any finance professional can enter the details of invoices, purchase orders, etc. The software then automatically reconciles the data, adjusts the entries, and updates the accounts to create financial reports.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Single-Entry-vs-Double-Entry-Bookkeeping\"><\/span><b>Single Entry v\/s Double-Entry Bookkeeping<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/razorpay.com\/blog\/business-banking\/single-entry-accounting\/\">Single-entry bookkeeping<\/a> refers to recording a transaction only once in the journal. Small businesses use this to keep a daily or weekly record of cash flow. This method is ineffective as it doesn\u2019t allow accurate vetting of financial transactions.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The single entry system of accounting reflects the current balance in your books but does not provide the bifurcation of transactions into expenses, fixed assets or advances. You will have to pass a different entry of all these transactions to provide an accurate financial report.\u00a0<\/span><\/p>\n<p>The<a href=\"https:\/\/razorpay.com\/blog\/business-banking\/double-entry-system\/\"> double-entry method<\/a> overcomes this problem.\u00a0<span style=\"font-weight: 400;\">In this method, each financial transaction is recorded twice, in two different categories &#8211; debit and credit. Here, every debit entry in an account should be equal to the corresponding credit entry in another account. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If not, it leads to accounting errors in the books, like the error of omission or error of commission &amp; which requires a check.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Cash-Based-vs-Accrual-Based\"><\/span>Cash Based vs Accrual Based<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Depending on when businesses recognise revenue and expenses, they can choose to follow either the cash-based or accrual-based method.<\/p>\n<p>Under the cash based method of bookkeeping, businesses only recognise revenue and expenses when there is cash involved in the transaction. Credit transactions are not recognised until they mature and bring or remove cash from the business.<\/p>\n<p>This method works better with the single entry system of accounting which maintains a cash book for all transactions involving cash.<\/p>\n<p>The accrual method is best suited for double entry bookkeeping which takes into consideration transactions which do not involve cash as well. Revenue and expenses are recognised as soon as they are made.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Bookkeeping-Back-in-the-Day\"><\/span><b>Bookkeeping, Back in the Day\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Before the days of <\/span><a href=\"https:\/\/razorpay.com\/learn\/finance-automation-definition-benefits\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">finance automation<\/span><\/a><span style=\"font-weight: 400;\">, businesses recorded their day-to-day transactions manually. The traditional way of bookkeeping required maintaining separate journals for sales,\u00a0 purchases, etc.,\u00a0 by hand.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The different transactions were then matched with separate accounts (ledgers) like sales, employee expenses, loan payments, etc. Each account\u2019s balance was calculated manually to prepare financial reports.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Maintaining such sensitive financial data in physical books or spreadsheets is inefficient &amp; risky. It\u2019s prone to human error &amp; requires a lot of manual bandwidth which can be better utilised in scaling the business.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Till date, small businesses with fewer transactions use manual methods but are slowly warming up to the idea of automated methods.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"The-era-of-automation\"><\/span><b>The era of automation<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Automated bookkeeping software provides a smart way of recording financial transactions, right from vendor payments to employee expenses.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It automates the categorisation of your transactions, reconciles your bank statements &amp; prepares actionable financial reports.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While the software automates repetitive bookkeeping tasks, finance professionals can invest more time in interpreting financial statements &amp; reports. <\/span><a href=\"https:\/\/razorpay.com\/learn\/finance-automation-definition-benefits\/\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"font-weight: 400;\">Finance automation<\/span><\/a><span style=\"font-weight: 400;\"> frees them from tedious manual tasks &amp; puts them in control of making key business decisions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">New-age Business Banking in the same way has helped shape the financial operations of businesses today significantly.<\/span><\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">One-stop banking solutions platforms like<\/span><a href=\"https:\/\/razorpay.com\/x\/current-accounts\/\"> <span style=\"font-weight: 400;\">RazorpayX<\/span><\/a><span style=\"font-weight: 400;\"> allow business owners to open<\/span><a href=\"https:\/\/razorpay.com\/x\/current-accounts\/?utm_source=direct&amp;utm_medium=website\"> <span style=\"font-weight: 400;\">current accounts<\/span><\/a><span style=\"font-weight: 400;\">,<\/span><a href=\"https:\/\/razorpay.com\/x\/tax-payments\/\"> <span style=\"font-weight: 400;\">pay taxes<\/span><\/a><span style=\"font-weight: 400;\">, schedule payments,<\/span><a href=\"https:\/\/razorpay.com\/x\/vendor-payments\/\"> <span style=\"font-weight: 400;\">pay vendors<\/span><\/a><span style=\"font-weight: 400;\"> seamlessly and check invoices from a single dashboard. This saves valuable time and effort.\u00a0<\/span><\/li>\n<li><span style=\"font-weight: 400;\">It is an accounting and banking platform that fills the gap between advanced banking solutions and finance professionals. It allows easy accounting software integration.<\/span><\/li>\n<li>With<a style=\"font-size: 19px;\" href=\"https:\/\/razorpay.com\/payroll\/\"> RazorpayX Payroll<\/a><span style=\"font-weight: 400;\">, businesses can automate salary payments and provide insurance policies to their employees.<\/span><\/li>\n<\/ul>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_business_banking_what_is_bookkeeping&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">RazorpayX powered Current Account<\/a><\/div>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Bookkeeping is a crucial yet small piece of your overall company\u2019s finances. We at RazorpayX are empowering businesses to manage their entire <\/span><span style=\"font-weight: 400;\">finances from a single platform with our business banking solution.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently-Asked-Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\t\t\t<div id=\"rank-math-rich-snippet-wrapper\" class=\"\">\n\n\t\t\t\t\n\t\t\t<\/div>\n\t\t\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Bookkeeping means keeping a record of day-to-day financial transactions. It provides key financial insights that helps in strategising businesses growth. <\/p>\n","protected":false},"author":151156539,"featured_media":3835,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3437],"tags":[3455,3485],"class_list":{"0":"post-3833","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banking","8":"tag-automation","9":"tag-finance"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3833","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156539"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=3833"}],"version-history":[{"count":16,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3833\/revisions"}],"predecessor-version":[{"id":8341,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/3833\/revisions\/8341"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/3835"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=3833"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=3833"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=3833"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}