What is manual bookkeeping?

 
      Scholars claim that double entry bookkeeping had been in use in Italy for hundreds of years before the first book entitled Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything About Arithmetic, Geometry and Proportion) was written on it by Pacioli in 1494. Bookkeeping was one of five topics covered, included "in order that the subjects of the most gracious Duke of Urbino may have complete instructions in the conduct of business," and to "give the trader without delay information as to his assets and liabilities." Computer bookkeeping, derived from this ancient system, is a convenience.
 
      Manual bookkeeping is done by hand with paper and pen in Journal and Ledger books.
 
      There are generally three Journal books, two of them with very wide pages. 1.) Cash-In (bank deposits and cash (debits)) plus columns for all the relevant income and sales accounts plus a miscellaneous column for unusual receipts (credits), and
 
      2.) Cash-Out (generally checks (credits)) plus columns for all/most of the relevant expenses and a column for miscellaneous unusual payments (debits) and
 
      3.) General Journal especially for entries that do not belong in either of the other two journals. There may also be journals for Receivables and Payables, equipment, etc.
 
      There is also a General Ledger book in which the General Ledger account totals are entered.
 
      Because manual bookkeeping is time consuming and prone to mathematical errors, there are no entries, ever, that are entered directly into a general ledger account. All entries are first recorded in journals, totalled and balanced across at the end of every month, and posted in totals to the general ledger accounts. As a general rule, this helps to insure that the General Ledger will be in balance.
 
      The general ledger accounts, then, show only monthly totals, no individual entries ever except from the General Journal. General Journal entries are posted individually to the General Ledger.
 
      After all accounts are posted at month end, a Trial Balance (totals on all accounts) is run on the General Ledger Accounts. The total should be zero. (Any amount at all shows the amount the General Ledger is out of balance.) When in balance, appropriate account totals are entered into the Balance Sheet and the Profit and Loss Statement. They will both be out of balance, and by the same amount. If a credit on the Profit and Loss Statement, (excess of income over expense) the company has made this amount of profit to that point in the year.
 
      Computer accounting systems do not allow errors in addition and subtraction so there is no necessity to use journals. Computer programs are thus designed to make entries directly into the general ledger accounts. They are, therefore, a collection of individual entries. Generally there are convenient reports called "Journals" that will gather together entries of one or another particular type.
 

---

 
Shirt-sleeves Bookkeeping, the how-to for practicing bookkeepers, manual and computer.
 

Shirt-sleeves
Bookkeeping
 
Back