WRITING OF BOOKS IN BOOKKEEPING

The process of writing in these books involves several steps:

1. Recording: When a transaction occurs, it’s recorded in the appropriate book of prime entry or subsidiary book. Each transaction is accompanied by relevant details like date, amount, parties involved, and nature of the transaction. Transactions are initially recorded in the journal, indicating the accounts involved, amounts, and a brief description.
2. Posting to Ledger: Entries from the journal are posted to the respective accounts in the ledger. Debits and credits are recorded appropriately based on accounting principles. Periodically, the transactions from the books of prime entry and subsidiary books are summarized and posted to the general ledger. Each account in the ledger is debited or credited based on the nature of the transaction.
3. Balancing: At the end of an accounting period, such as a month or a year, the balances of various accounts are calculated. For instance, the cash book’s debit and credit sides should match to ensure accuracy. Ledger accounts are periodically balanced to determine their ending balances, which are needed for preparing financial statements.
4. Trial Balance: A trial balance is prepared by listing all the ledger accounts with their debit and credit balances. This helps ensure that debits equal credits and acts as a preliminary step before preparing financial statements.
5. Preparation of Financial Statements: Using the information from the ledger accounts, financial statements like the income statement and balance sheet are prepared to provide insights into the company’s financial performance and position.
6. Adjusting Entries: Adjustments for accruals, prepayments, depreciation, etc., are made to ensure the accounts reflect the correct financial position.
7. Financial Statements: Finally, financial statements like the balance sheet and income statement are prepared using the information from the adjusted trial balance.
8. Reconciliation: Regular reconciliation is done to ensure that the balances in the subsidiary books match those in the ledger and that any discrepancies are resolved.