Regardless of forms of business entity an organization belongs, the entity must write financial entries and keep financial records on its own. One of the main reason is that in the Philippine settings businesses are required to file tax returns and pay taxes dues aside from other government compliance requirements such as local taxes and municipality permits, sss premium contributions, phil-health premium contributions, pag-ibig or hdmf contributions, etc. What the entity files or pays to the government agencies and bureaus are based on the financial records it writes and keeps.
Record keeping : Bookkeeping
In businesses, financial transactions are recorded. The tool where the financial records of the business are written and kept are called Books Of Accounts. The manner the entity records its financial transactions is called record keeping or bookkeeping.
Bookkeeping has two kinds, the Single-Entry Bookkeeping and Double-Entry Bookkeeping
Single-Entry refers to the incomplete recording of transactions. In its simplest form, only one record maybe kept where all the transactions are narratively entered or posted. Thus, it does not provide properly analyzed transactions and can not recognized the effects of transactions all the time. As a consequence, preparers of financial statements are faced with some problems reconstructing the accounts to properly prepare financial statements and determine the income or loss.
Double-Entry refers to the dual-effect that each transaction has on the accounting equation. Under this system, all the transactions are assumed to have a dual-effect or two-fold effect on the accounting values and at least affects two accounts.
Accounting values: Value Received and Value Parted With
Meaning, in the Double-Entry System, it's like a relationship, there's a give and take. We give the value parted with, and we take the value received.
- Books of Final Entry : Ledgers
- Trial Balance
- Financial Statements