Bookkeeping is the process of tracking and recording all the financial transactions that occur every day within a business. Each transaction is categorized based on what it was for and recorded in the corresponding journal with the date, a brief description of the transaction, and the amount, which should signify whether it was a debit or credit. For example, if the transaction is for the sale of an item paid for with cash, it may be recorded in the sales journal (as a credit) and the cash journal (as a debit). Remember, the accounting equation must remain balanced: Assets = Liabilities + Equity. A sale is considered to be equity. Once all the transactions have been recorded, you must check your work. Books that have any errors in them are not going to be useful. You should reconcile your accounts regularly (confirm them to be accurate using the bank statements) and create a trial balance to check for any errors. You would then use the information in your books to create the financial statements for that specific period. Most businesses create the income statement (also known as the profit and loss statement) and the balance sheet on a regular basis to make sure they are staying on track financially.
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