Updated: Aug 20, 2021

The formal processes of ‘ accounting – the keeping of records concerning the everyday activities and transactions of a business or non-profit-making organization. The ‘books’ normally kept are generally categorized as books of prime entry on the one hand and ledgers on the other. Books of prime entry are those which contain the preliminary and detailed record of transactions. They consist of (1) the cash book; (2) the ‘day books’ for purchases and sales – which, as the name suggests, carry day-to-day details of goods or services bought and sold; and (3) the ‘journal’ which records details of the more unusual transactions or transfers which are not purchases or sales in the normal course of business or B which do not involve cash. Ledgers contain detailed accounts for both assets and liabilities and income and expenditure on the one hand, and debtors and creditors on the other. The former comprise what are known as ‘real’ and ‘nominal’ accounts and the latter comprise ‘personal’ accounts.

Specialized books of account may be used in certain business ventures, e.g. the solicitors’ rules, which apply to accounts kept by solicitors, require two distinct ledgers for clients – the one recording dealings in the clients’ own funds held on trust and the other recording expenditure incurred on the clients’ behalf and chargeable to them – to be set against payment of bills rendered to them.

Other books of record which may be included among those involved under the general heading of book-keeping include stock-books and asset registers. On a lower plane subsidiary books such as the petty cash book and the postage book may also be numbered among permanent records. The degree of training or experience required by a person entrusted with the job of bookkeeping will vary considerably with the size and complexity of the organization.

Reference: The Penguin Dictionary of Economics, 3rd edt.

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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.