WHY LEARN BOOK-KEEPING?

Why learn book-keeping – it is a question I often get asked by my students. It is a good question and it deserves a considered reply.


But before answering the question why learn book=keeping it is important to explain ‘what is bookkeeping’. Bookkeeping is the recording of a business’s commercial transactions. Examples of such transactions are purchases, sales and expenses which must be recorded in the business’s accounting records. Once the transactions have been recorded, they can be summarised at the end of the accounting period to produce the Income Statement and Balance Sheet.

From this definition we can see that bookkeeping is at the heart of business it is often said to be the language of business. If you want to talk business then you have to know the meaning of net profit, gross profit, receivables and payables.

If you want to really understand the financial performance and financial position of the business then a knowledge of double entry bookkeeping is very useful.

The reason why people learn bookkeeping are many and varied. Maybe you want to pursue a career as a bookkeeper or an accountant and obviously you will have to study double entry bookkeeping to a level that many would not wish to do so.

You may run your own business and feel that a knowledge of bookkeeping would give you a greater understanding of the business, and perhaps you are becoming more than a little concerned about the rising costs of your accountant’s fee. Even if you can’t do without an accountant perhaps you could reduce his fees by doing some of the bookkeeping work yourself.

Also book-keeping does lend itself to computerisation, essentially you are inputting data of financial transactions into the accounting software, and the computer then  analyses it  and presents  it in useful forms such as the Income Statement and the Balance Sheet. Providing the data is entered correctly then computer software is fine, the problem is when things go wrong. For example if capital expenditure is inputted  as revenue expenditure. A good working knowledge of bookkeeping would help you to correct and reverse this error – so that you can get  the best out of your computer package.

Lastly many courses at college or universities run courses on finance and often bookkeeping is a module for which they have to study. Many finance students will go on to be shareholders in companies, or become government or bank officials and their knowledge of double entry will always come in useful.

 

why learn book-keeping
Knowledge of book-keeping will make you a better student.

About the author  of this article.
Michael Hughes is the founder and creator of this site on Free Book-keeping IMG_0177Courses Online UK. He is  known for his ability to explain book-keeping and accounting in a clear, concise and thorough manner. He has a BA (Hons) in Accounting and Finance and a Teaching Certificate from the University of Manchester.His background includes:-15 years as founder and managing partner of a UK accountancy distance learning company.-11 years as a college lecturer in accountancy.-5 years in HMRC-4 years in public accountancy practice.
His interest and passion includes communicating accounting and creating free book-keeping courses and imparting his knowledge through the Internet.


 

Michael lives in Lincolnshire in the UK and he can be contacted by email on frankwood1@o2.co.uk
For a list of all the free bookkeeping courses that we offer please click the link below:
List of free book-keeping courses

Learn double entry bookkeeping in one hour

Learn double entry bookkeeping in one hour – yes it is possible once you understand the main concept underpinning double entry.


That concept is called the business entity concept which states that for bookkeeping purposes the business must be treated separately from the owner.

Even if you are self employed and you trade in your own name, for bookkeeping purposes the business is separate from you i.e. it has a life (and death) of its own.

This separation between the owner and the business  means that there are two aspects to be considered in every transaction. One from the business’ point of view and the other from the proprietor’s point of view – hence the ‘double’ entry.

This dual effect is best illustrated with an example

Suppose on May 1 Tom decides to start his own business as a plumber.

He invests £1000 into the business bank account.

What are the two effects of this?
1. The business gains cash at bank of £1000
2. The business owes the proprietor (Tom) £1000

The correct terminology for money owed by a business to the proprietor is called ‘CAPITAL’.

The double entry for recording the above means that we have to open two accounts :

1.Bank Account

2.Capital Account

The entries in the accounts would look like this:

Bank Account
Dr         Cr
Date Details £ Date Details £
1 May Capital A/c 1000
Capital Account
Dr           Cr
Date Details £   Date Details £
 1  Bank a/c 1000

Notice that that the entry in the bank is made on the left hand side of the account and the entry in the capital account is made on the right hand side.

The rule is:

if we are going to increase the value of an asset such as paying money into the business bank account then we record this on the left hand side of the account.

if we are going to increase the value of a liability such as capital we show it on the right hand side.

Now its your turn, complete the double entry for the following transaction.

Becky started in businss on April 1 as a hairdresser and deposited £3500 into her business bank account

Bank  Account
Dr Cr
Date Details £ Date Details £
Capital Account
Dr Cr
Date Details £ Date Details £

ANSWER

Bank Account
Dr         Cr
Date Details £ Date Details £
1 Capital A/c 3500

Capital Account
Dr           Cr
Date Details £   Date Details £
 1  Bank a/c 3500

It’s probably taken you under an hour to read this article but by now you should have grasped the main principle of double entry bookkeeping. If you would like to continue this article on learn double entry bookkeeping then please click on the links below.

About the author  of this article.
Michael Hughes is the founder and creator of this site on Free Book-keeping IMG_0177Courses Online UK. He is  known for his ability to explain book-keeping and accounting in a clear, concise and thorough manner. He has a BA (Hons) in Accounting and Finance and a Teaching Certificate from the University of Manchester.His background includes:-15 years as founder and managing partner of a UK accountancy distance learning company.-11 years as a college lecturer in accountancy.-5 years in HMRC-4 years in public accountancy practice.
His interest and passion includes communicating accounting and creating free book-keeping courses and imparting his knowledge through the Internet.

Michael lives in Lincolnshire in the UK and he can be contacted by email on frankwood1@o2.co.uk
For a list of all the free bookkeeping courses that we offer please click the link below:
List of free book-keeping courses

learn bookkeeping at home

To learn bookkeeping at home is a great way to study. Before the advent of the internet people studied bookkeeping at home through correspondence courses.


In fact bookkeeping was one of the first subjects to be developed as a correspondence course for people who couldn’t get to college. Soldiers during the first world war could enrol on a correspondence course and have their material sent to their ‘home’ in the trenches. They would read the course notes and then return their ‘homework’ for marking. These courses were subsidised by the military as they were keen to develop the education and training of soldiers – so the concept of learning bookkeeping from home is nothing new!

 learn bookkeeping at home
Learn bookkeeping at home .

It is interesting to note that learning bookkeeping from home is still one of the most popular topics to learn at home as it was in 1914.

Of course those unfortunate soldiers were in the trenches by circumstance and not by design. Maybe you to have no alternative but to study at home. Perhaps you are a mother with young children and don’t want to leave them with a baby sitter whilst you attend college. Maybe you are disabled with restricted movememt and your local college may as well be on the moon!

Perhaps you are a shift worker and work irregular hours and a college course would be out of the question. Or maybe you just don’t want to attend college through the dark cold winter nights.

Whatever your reason for wanting to learn bookkeeping at home you now have a lot more choices of training companies than the boys in 1914.

If you type into Google ‘learn bookkeeping at home’ you will get page after page of training companies trying to sell you their courses and the choice can be a little daunting.

What you should bear in mind when looking for a training company is that bookkeeping is a very practical subject, it is a skill which can be learnt through practice and repetition. There are no complicated mathematical formulae involved , you just need the basic arithmetic skills of addition, subtraction, multiplication and division.

Most courses will assume that you have a basic knowledge of arithmetic and English . If you don’t, then have a look at our NUMERACY SKILLS FOR BUSINESS: FREE COURSE. Once you have mastered these skills only then should attempt a bookkeeping course.

If you are going to learn bookkeeping at home  then you don’t want to spend a lot of money on the course. Most training companies will supply you with a textbook (or you down load the course notes) and then you read the notes and return assignments for marking. Many will offer access to a tutor for support. You should not pay more than £30.00 for a course like this – remember bookkeeping is not rocket science and you will rarely have to contact a tutor.

The Institute of Certified Bookkeepers has a list of approved training providers.

Besides, there is plenty of FREE material on the internet and videos on Youtube and it has never been easier to learn bookkeeping from home, at least compared to the poor boys in the trenches of the Great War.

Good Luck with your studies!
About the author  of this article.
Michael Hughes is the founder and creator of this site on Free Book-keeping IMG_0177Courses Online UK. He is  known for his ability to explain book-keeping and accounting in a clear, concise and thorough manner. He has a BA (Hons) in Accounting and Finance and a Teaching Certificate from the University of Manchester.His background includes:-15 years as founder and managing partner of a UK accountancy distance learning company.-11 years as a college lecturer in accountancy.-5 years in HMRC-4 years in public accountancy practice.
His interest and passion includes communicating accounting and creating free book-keeping courses and imparting his knowledge through the Internet.

Michael lives in Lincolnshire in the UK and he can be contacted by email on frankwood1@o2.co.uk
For a list of all the free bookkeeping courses that we offer please click the link below:
List of free book-keeping courses

learn bank reconciliation online


Example: learn bank reconciliation online

The bank statement of a business showed it had £1000 Cr balance as at 30 April 201X.
A cheque from GB Ltd for £500 had been recorded as a debit entry in the cash book but did not appear on the bank statement.
Another cheque from X Ltd for £85 had been recorded as a debit entry in the cash book but did not appear on the bank statement.
The business had also paid its supplier BD Ltd by a cheque totaling £22 this had been recorded in the cash book but did not appear on the bank statement.
Enter the details in the bank reconciliation statement below and calculate the balance as per cash book as 30 April.

Bank reconciliation statement as at 30th April 201X
£
 Balance as per bank statement:
ADD: Lodgements not yet credited:
 Name:
 Name:
 Name:
TOTAL:
 LESS: Unpresented cheques:
Name:
Name:
Name:
 Total to subtract:
  Balance as per cash book:


The balance on the cash book would be a debit balance of £1560.
About the author  of this article.
Michael Hughes is the founder and creator of this site on Free Book-keeping IMG_0177Courses Online UK. He is  known for his ability to explain book-keeping and accounting in a clear, concise and thorough manner. He has a BA (Hons) in Accounting and Finance and a Teaching Certificate from the University of Manchester.His background includes:-15 years as founder and managing partner of a UK accountancy distance learning company.-11 years as a college lecturer in accountancy.-5 years in HMRC-4 years in public accountancy practice.
His interest and passion includes communicating accounting and creating free book-keeping courses and imparting his knowledge through the Internet.
Michael lives in Lincolnshire in the UK and he can be contacted by email on frankwood1@o2.co.uk
For a list of all the free bookkeeping courses that we offer please click the link below:
List of free book-keeping courses

learn bookkeeping online free

To learn bookkeeping online free is simple, there are plenty of free courses on the web and on Youtube – some of which are excellent and others not so good.

I have taught bookkeeping for many years and I have accumulated many resources, such as power point presentations and exercises for students to practice their newly acquired skills.
Whilst an online course can be great for teaching theory, bookkeeping is essentially a practical subject and can only be learnt through pratice and repetition.

For example, most online courses would explain the nature of a Purchase Ledger (Payables) Control account and then go on to show an image of one as below:

learn bookkeeping online free

The image is fine but there is no interaction and students can’t practice their double entry skills with a static image.

Problems with learn bookkeeping online free

I have tried to resolve this issue so that students can actually enter data onto the web page as if they were keeping real books. The example below will show you what I mean:

Prepare a purchase ledger (Payables) control  account for the month of May from the following information:
May 1 opening balance on Purchase ledger (Payables) control account £47600
31 May

credit purchases for the month  £48565
purchases returns to credit suppliers for the month £480
payments made to credit suppliers for the month £32368
discounts received for the month £650

Balance the account below as at 31 May

Purchase Ledger Control Account
Dr Cr
Date Details £ Date Details £


Answer: You should have credit balance of £62667 as at 31 May.

To conclude this article on how to learn bookkeeping online free is possible but it requires motivation and an opportunity for you to practice debit and credit entries, such as with the ledger above.The next step for me is to figure out how the data entered can be saved so that more demanding questions or case studies can be created. Any suggestions or comments, please enter them in the box below.

About the author  of this article on learn bookkeeping online free .

Michael Hughes is the founder and creator of this site on Free Book-keeping IMG_0177Courses Online UK. He is  known for his ability to explain book-keeping and accounting in a clear, concise and thorough manner. He has a BA (Hons) in Accounting and Finance and a Teaching Certificate from the University of Manchester.His background includes:-15 years as founder and managing partner of a UK accountancy distance learning company.-11 years as a college lecturer in accountancy.-5 years in HMRC-4 years in public accountancy practice.
His interest and passion includes communicating accounting and creating free book-keeping courses and imparting his knowledge through the Internet.

Michael lives in Lincolnshire in the UK and he can be contacted by email on frankwood1@o2.co.uk
For a list of all the free bookkeeping courses that we offer please click the link below:
List of free book-keeping courses