Explained: Recordkeeping in accounting

Recording in accounting refers to keeping a record of monetary business transactions, reflecting the correct picture of assets-liabilities, profits, loss, etc. Recordkeeping helps companies track each business transaction, including new equipment purchases, product sales, service costs, payroll expenses, etc.

 Accurate recordkeeping provides important information for legal and tax purposes. In addition, recording Transactions in the Cash Book and Chequebook helps match transactions Contained in the Pass Book/Bank Statement, which is important for Bank account reconciliation. Recordkeeping systems not only help monitor all the financial transactions of businesses, but they also help make decisions on daily activities with detailed insights into the organisation’s future plans and budgeting for the same.

The procedure involved in the recordkeeping system:

Identifying the transactions

Recording in the journal

Classifying the nature of the transaction

Posting to ledger

Balancing of accounts

Preparing a financial statement

Interpreting the financial statements

Communicating it to stakeholders

Some changes in the method of record-keeping may be needed in certain cases only for better disclosure requirements or needed by accounting standards.