Common Practices in Business

Operations
Marketing and Bookkeeping
MARKETING
Marketing
 It refers to the process of product development as well as
sales, promotion and distribution.
 The whole concept of marketing revolves around the
customer. In marketing, the needs of the customer comes
first. During product development, prospective customers
are determined and analyzed.
Marketing
 The company then comes up with a product line that would
best answer those needs.
 Businesses can no longer take a laid back approach when it
comes to sales. It has become their job not just to produce
products and services that would cater to customers’ needs,
but also to convince the customers that their product and
service offering is superior compared to their competitors.
This is why promotion, sales and distribution also fall under
marketing.
Marketing
 When it comes to promotion, marketers use various
methods such as mass media (TV and radio), newspapers,
direct mail, billboards, etc.
 The Internet also plays a significant role when it comes to
marketing the products of certain companies since it is
relatively inexpensive. Examples of internet marketing
methods include email marketing, pay-per-click ads, search
engine marketing and social media marketing.
Bookkeeping
Bookkeeping
 Accounting - is the systematic and comprehensive
recording of financial transactions pertaining to a business
 Bookkeeping – the most basic activity in accounting; it is
the process of recording all financial transactions to keep
track of the cash flow
Bookkeeping
 Bookkeeping is usually an entry level job for accountants.
Once they master the eye for detail that is needed to keep
books straight, they often move on to the more complex job
of analyzing the records kept by bookkeepers and writing up
financial reports.
Types of Bookkeeping:
1. Single-entry bookkeeping – is an accounting system
under which every transaction is recorded in a single line
only. This is a very simple method which is commonly used in
the checkbook records. Since one transaction is recorded in a
single line only, this already includes information on the date
of the transaction, the amount debited or credited and so on.
This method is adopted by small business enterprises.
Example of a Single-Entry Bookkeeping
System
Advantages and Disadvantages of
Single-entry Bookkeeping
Types of Bookkeeping:
2. Double-entry bookkeeping – is a kind of accounting
system governed by certain rules which ensure that each
transaction that takes place is reflected in two separate
accounts. In more concrete terms, this makes use of a system
of debits and credits. Such a system is in accordance with the
idea that equity may be computed by subtracting liabilities
from assets. Therefore, any change in one area translates into
an equal but opposite change in another column.
 One of the advantages of using such a system is that errors in
accounting may easily be detected. If for example, the
computation for debits does not correspond with that of the
credits, the books are said to be unbalanced, and a mistake has
been made. However, it is still possible, although somewhat
unlikely, for the books to be balanced despite the existence of
some errors. This can happen if errors were made in
computation for both debits and credits, and one served to
cancel out the other.
Example of a Double-entry
bookkeeping system
 Advantages of the Double-entry
bookkeeping system:
 Under this method both the aspects of each and every transaction are recorded. So it
is possible to keep a complete account.
 Since both the aspects of a transaction are recorded, for each debit there must be a
corresponding credit of an equal amount. Therefore, total debits must be equal to
total credits. In fact, it is possible to verify the arithmetical accuracy of the books of
accounts by ascertaining whether the two sides become equal or not through a
process known as the trial balance.
 Under this system profit and loss account can be prepared easily by taking together all
the accounts relating to income or revenue and expenses or losses and thereby the
result of the business can be ascertained.
 A balance sheet can be prepared by taking together all the accounts relating to assets
and liabilities and thereby the financial position of the business can be assessed.
 Under this system mistakes and deflections can be detected - this exerts a moral
pressure on the accountant and his staff.
 Under this system necessary statistics are easily available so that the management can
take appropriate decision and run the business efficiently.
Disadvantages of the Double-entry bookkeeping
system:

Despite so may advantages of the system, double entry system

has some disadvantages which are as follows:

 Under this method each transaction is recorded in books in

two stages (journal and ledger) and two sides (debit and
credit). This results in increase of number and size of books
of account and creation of complications.
 It involves time, labor and money. So it is not possible for
small concerns to keep accounts under this system.
 It requires an expert’s knowledge to keep accounts under this
system.
Difference between Single-entry and
Double-entry bookkeeping system
1. Transactions Recorded Double and Single Entry
System
 One of the main difference between single entry system and
double entry system is the type of record that is captured in
the books of accounts and the method through which it is
captured. In a single entry system, only single entry is
recorded which can be either debit or credit transaction.
 On the other hand, double entry system has a double
recording method in each transaction. This means that for
every debit record there is a corresponding credit entry and
vice versa. A debit and a credit entry are recorded for any
transaction that happens in the enterprise.
Difference between Single-entry and
Double-entry bookkeeping system
2. User of Double and Single Entry System
 The complexity and number of transactions play a vital role
in determining who adopts single entry system and double
entry system. The single entry system is mostly used by small
business organizations which include sole proprietors and
partnerships.
 The double entry system of recording financial activities is
used by both small and significant business enterprises. Large
organizations are required to use double entry system to
record their transactions because this method ensures
accuracy.
Difference between Single-entry and
Double-entry bookkeeping system
3. Costs Involved in Double and Single Entry System
 Single entry system of bookkeeping does not require any
costs to implement. This is because skilled personnel are not
needed to aid in recording transactions using a single entry
system. It is a simple method of recording enterprise
activities.
 Double entry system of bookkeeping is a technical affair that
requires skilled personnel to implement. High costs are
involved when hiring trained people such as trained
accountants to help in the complicated method of recording
financial transactions.
Difference between Single-entry and
Double-entry bookkeeping system
4. Detection of Errors in Double and Single Entry
System
 It is very tough to detect errors in bookkeeping when an
organization adopts the single entry system of recording
business activities. A corresponding entry is not available for
comparison which means that the level of arithmetic
inaccuracy is very high.
 On the other hand, detection of errors can quickly be done
in the double entry method because a corresponding entry
has been recorded which can help in comparison. This means
that there is a high level of arithmetic accuracy.
Difference between Single-entry and
Double-entry bookkeeping system
5. Accounts Maintained in Double and Single Entry
System
 Single entry system of bookkeeping helps in maintaining
personal and straightforward accounts of the debtors and
creditors of the organization. It is also necessary to highlight
that single entry system is used when entering entries in the
cashbook.
 The double entry system is highly used in maintaining all
personal, real, and nominal accounts of the organization. It is
also used in keeping complex financial statements of the
company which includes share allotment among others.
Difference between Single-entry and
Double-entry bookkeeping system
6. Preparation of Trial Balance
 The single entry system cannot be used in preparing the trial
balance of the company because all the transactions recorded
in the books of accounts are incomplete.
 In a double-entry system, a trial balance can be recorded
using the information recorded in the books of accounts
because debit and credit of transactions are maintained
making it easy to prepare the system.
Difference between Single-entry and
Double-entry bookkeeping system
7. Profit and Loss Account
 Preparation of the profit and loss account cannot be prepared
through the information assembled through the single entry
system. This means that this system cannot help the
organization to determine its financial position.
 On the other hand, the double entry system of recording
financial transactions of the organization is useful in the
preparation of trading profit and loss accounts. This means
that the dual entry system of bookkeeping helps the
enterprise to determine its financial position.
Recording Business Transactions
The following items are used when it comes to recording business
transactions:

 Journal – is a chronological order of the entity’s transactions.

Also known as the “book of original entry”. A journal entry shows
all the effects of a business transaction in terms of debits and
credits. The “general journal” is the simplest journal.
 Ledger – a grouping of accounts. It is used to classify and
summarize transactions and to prepare data for basic financial
statements
 Trial balance – is a list of all accounts with their respective debit
or credit balances. It is prepared to verify the equality of debits
and credits in the ledger at the end of each accounting period or at
any time the postings are updated.
Auditing
 This refers to the careful examination of an individual or firm’s
financial records for the purpose of determining its validity and
reliability.
 Auditors can work for the company as an internal auditor or serve
as an external auditor for multiple clients.
 External auditors are appointed from outside the organization.
Their job is to protect the interests of the users of the financial
statements.
 Internal auditors are employees of the company. They are
appointed by, and answer to, the company’s management though
they work independently of the accounting and other
departments. They ensure the accuracy of business records,
uncover internal control problems and identify operational
difficulties.