What is an accounting book? Regulations on accounting books: Types of accounting books, principles of accounting books, how to record accounting books (record in general ledger, general journal, detailed books).
A business needs to have a journal to record detailed books, documents and related information, and at the same time, must comply with accounting rules and standards. In this article, Online Accounting will clarify and analyze issues related to accounting books, detailed classification of accounting books.
I. What are accounting books?
Bookkeeping is an organized system of recording the financial events of a business or organization.
During an accounting period, each business has only one accounting system, which is used to serve the main purpose of tracking and recording all financial transactions that affect the financial situation of the business. These transactions include: purchases, sales, expenses, income, liabilities, receivables and other financial events.
There are many different types of accounting books such as: general ledger, detailed ledger, general ledger, warehouse accounting ledger, budget ledger… depending on the type of business and specific accounting requirements. For accuracy and transparency in financial reporting, accounting books often follow accounting rules and standards.
II. Are business accounting books important?
Accounting books play a particularly important role in the financial management of a business, specifically in monitoring and controlling financial activities. Below are some prominent roles of accounting books:
➨ Track financial transactions:
Accounting books are where all financial transactions of a business are recorded, including: purchases, expenses, income, payables, receivables and other events. This helps businesses to monitor and understand the financial situation of their company.
➨ For financial reporting:
Data from accounting records is used to create financial reports such as balance sheets, cash flow statements, and profit and loss statements. These reports provide important information for evaluating a business’s performance and financial condition.
➨ Convenient for auditing:
Bookkeeping provides an organized information system that allows for easy checking and verification of a business’s financial information. This is important when a business needs to be audited by an outside party or needs to demonstrate its transparency.
➨ Tax management:
Accounting records provide the information needed to calculate and report taxes. Maintaining proper records helps businesses ensure:
- Comply with tax regulations;
- Avoid penalties due to inaccurate reporting.
➨ Debt and credit management:
Accounting records allow businesses to keep track of their accounts payable and receivable, which helps them better manage their finances and make decisions about extending credit or demanding payment.
➨ Strategic decisions:
Information from accounting records can support a business’s strategic decisions, such as: evaluating the performance of products or services, determining key sources of income, and planning budgets.
In short, accounting books are not only a basic management tool but also an important part of strategic decision making and ensuring compliance with financial regulations of the business.
III. Types of accounting books
Accounting books are currently divided into many different types, each serving a specific purpose in the financial management process of a business.
1. Classification by accounting record keeping
3 types of accounting books are divided based on the way of recording in the books:
➨ Chronological notebook:
- Used to continuously record all economic and financial activities in chronological order of arising economic and financial activities;
- Details of types of books: general journal, voucher registration book.
➨ Systematic notebook:
- Used to record and systematize economic and financial activities arising according to each accounting account;
- Details of types of books: general ledger and detailed ledger.
➨ Combined book:
- Used to combine recording of financial and economic activities in chronological order and tracking accounting objects according to economic information on one page;
- Details of types of books: journals – ledgers.
2. Classify books according to the content information recorded in the accounting books.
Based on the information recorded in the book, accounting books are divided into the following 3 types:
➨ General ledger:
- Reflects data on financial and economic activities in a comprehensive form (level 1 accounts), providing general indicators for accounting work;
- Including types of books: ledger, journal – ledger, general journal, register of accounting documents.
➨ Accounting details:
- Reflects detailed data on the general ledger, opened according to detailed accounting accounts (level 2 and level 3 accounts). This book provides information on the operating situation at the detailed unit, serving the business administration;
- Including books such as: detailed accounting books for materials, customer receivables, and supplier payables.
➨ Combined accounting books:
- Combining general recording of economic and financial activities, while detailing data to meet management requirements, helps reduce the volume of recording and the number of books;
- Includes: voucher journal, multi-column ledger.
Each type of accounting book has its own functions and advantages. They are often used together to create a complete and transparent accounting system for businesses.
IV. Rules and principles of accounting records
1. Contents required when recording accounting books
According to the provisions of Clause 3, Article 24 of the 2015 Accounting Law, accounting books must include the following contents:
- Date of entry;
- Based on the date, month and year of the document to record;
- Briefly summarize the content of the transaction;
- Record the amount of transactions into accounting accounts;
- Record opening balance, amount incurred during the period, closing balance.
2. Principles of accounting records
According to Article 26 of the 2015 Accounting Law, the opening, recording, closing and storing of accounting books must comply with the following principles:
- Accounting books must be opened at the beginning of the annual accounting period. For newly established units, accounting books must be opened from the date of establishment;
- Must base on accounting documents to record accounting;
- Accounting records must be timely, clear, and complete according to the contents;
- Data and information recorded in accounting books must be honest, accurate, and consistent with the documents used for recording;
- Accounting records must ensure:
- Record in chronological order of transaction occurrence;
- Record the following information for the data recorded in the following year, take the data from the accounting books of the previous year and transfer it over;
- Continuous recording, from opening the book to closing the book.
- The figures and information in the accounting books must ensure:
- Write with pen;
- No additional writing below or above;
- Do not write on different lines or overlap;
- Cross out the blank space (if the page cannot be filled);
- Total the data when the page is full and move the total to the next page.
- When preparing financial statements, accountants must close the books at the end of the previous period and in other cases as prescribed;
- It is allowed to record by electronic means, however, it must comply with the provisions on accounting books in Article 24, Article 25, Clauses 1, 2, 3, 4, 6, Article 26, except for stamping on the edges;
- Print out hard copy accounting books on paper, bind them after closing the accounting books on electronic media for each accounting year and store them. In case of not printing, it is necessary to ensure the confidentiality of data information, ensure safety, and ensure that they are available for reference during the storage period.
3. Other important principles
➨ Principle of transparency:
- The records in the accounting books need to be clear and detailed so that everyone can understand the information that the accounting books convey;
- All accounting transactions and events must be fully recorded, without concealment.
➨ Exact principle:
- Accounting books must be accurate to ensure that the information used to prepare financial statements is correct and reliable;
- Accounting methods and recording rules must comply with legal regulations.
➨ Principle of fairness:
- Accounting books must fairly reflect the financial situation and business results of the enterprise;
- All means and techniques of recording must be applied fairly and without deception.
➨ Linking principles:
- There must be a connection and relationship between different books such as general ledger, detailed ledger and financial statements;
- The data in the accounting books must accurately reflect the business reality of the enterprise.
➨ Principle of compliance with the law:
- Enterprises must comply with the provisions of law on accounting and financial reporting;
- Accounting books should be maintained in accordance with applicable accounting standards and regulations.
➨ Security and preservation principles:
- Data in accounting books must be kept confidential and securely stored according to regulations;
- Enterprises must retain originals and copies of accounting documents for the prescribed period.
➨ Timing principle: Accounting events must be recorded as soon as they occur or within the shortest possible time. This is to ensure accuracy and avoid missing information;
➨ Principles of lookup and audit: Accounting books need to be designed so that they can be looked up easily and audited effectively to ensure transparency and accuracy.
V. Instructions on methods and ways to record accounting books for each type
1. How to record in the ledger
The general ledger process in accounting usually includes the following basic steps:
➨ Step 1: Determine the date and transaction description
- Transaction Date: Determine the date the transaction occurred and record it in the ledger;
- Transaction Description: A detailed description of the transaction, which should include information necessary to understand the accounting event (such as a description of the goods/services, counterparty name, or other information).
➨ Step 2: Account Classification
- Debit and credit accounts: Identify the debit and credit accounts involved in the transaction;
- Every transaction must have at least one debit account and one credit account.
➨ Step 3: Record in the ledger
- Record of debit account:
- Enter the amount in the “Debit” column of the corresponding debit account;
- Add more details if needed.
- Account records include:
- Enter the amount in the “Credit” column of the corresponding credit account;
- Add more details if needed.
➨ Step 4: Check balance
Make sure that the total debit amount equals the total credit amount. If it balances, the transaction is considered correct.
➨ Step 5: Browse and confirm transaction
- Review recorded information for accuracy;
- The person authorized to approve and confirm the transaction.
➨ Step 6: Transfer information
Information from the general ledger can be transferred to the corresponding detail ledgers or used to generate financial statements.
Note: This process may vary depending on the type of business and specific accounting system.
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2. How to record a general journal
Writing a general journal is an important job in accounting, done for the purpose of recording accounting transactions over time.
Here are the steps to writing a general journal:
➨ Step 1: Set the title of the general journal
- Title: Write “General Journal” at the top of the page;
- Posting Date: Enter the date on which the general journal is being posted.
➨ Step 2: Transaction description
- Transaction Date: For each transaction, record the date the transaction occurred;
- Detailed Description: A detailed description of the transaction. This information should be sufficient to understand the accounting event.
➨ Step 3: Account Classification
- Debit and Credit Accounts: For each line, identify the debit and credit accounts;
- Provide a detailed description of each account.
➨ Step 4: Record transaction details
- Record debit account: Enter the amount in the “Debit” column of the corresponding debit account;
- Credit account recording: Record the amount in the “Credit” column of the corresponding credit account.
➨ Step 5: Check balance
Make sure the total amount owed is equal to the total amount credited.
➨ Step 6: Browse and confirm transaction
- Check the information recorded in the book to ensure accuracy;
- The person authorized to approve and confirm the transaction.
➨ Step 7: Save
General journals should be kept in chronological order for easy reference and review in the future.
3. How to keep detailed records
Detailed journal entry is the process of recording detailed information about the transactions of a particular account in accounting.
Here are the detailed steps for bookkeeping:
➨ Step 1: Detailed ledger title
- Title: Enter the specific account name that the detail ledger is tracking;
- Start and End Dates: Record the start and end dates of the period that the ledger is managing (e.g. month, quarter, or fiscal year).
➨ Step 2: Transaction description
- Transaction Date: Record the date each transaction occurred;
- Detailed Description: A detailed description of the transaction, including information such as description of goods/services, partners, or other information.
➨ Step 3: Account Classification
- Debit and Credit Accounts: Identify the debit and credit accounts involved in the transaction;
- Provide a detailed description of each account.
➨ Step 4: Record transaction details
- Record debit account: Enter the amount in the “Debit” column of the corresponding debit account;
- Credit account recording: Record the amount in the “Credit” column of the corresponding credit account.
➨ Step 5: Check balance
Make sure the total amount owed is equal to the total amount credited.
➨ Step 6: Browse and confirm transaction
- Check the information recorded in the book to ensure accuracy;
- The person authorized to approve and confirm the transaction.
➨ Step 7: Save
It is advisable to keep detailed ledgers in chronological order for easy reference and review in the future.
VI. Frequently asked questions about accounting books
1. Is it possible for our company to build its own accounting system?
For accounting book forms, enterprises can build their own for their own company but must ensure to provide full and transparent financial information for checking, comparison and control. In case the enterprise does not build its own form, the enterprise can apply the form in Appendix 4 of Circular 200.
2. How should businesses handle errors in accounting books?
When there are errors in accounting books, depending on each error case, the enterprise can apply the following methods: additional recording method, negative number recording method, and correction method.