Bookkeeping Class S - What Is Bookkeeping?

By Kohei Hayashi

The Japan Chamber of Commerce and Industry offers several certification exams on bookkeeping skills, each with different skill levels.
In a series of blog posts, I'd like to explain accounting concepts required for their Bookkeeping Class S certification exam (S is not for Super as one might expect. It means Shokyu, which means a beginner's level in Japanese). I'll be using Cagamee accounting software to illustrate accounting concepts with specific examples.

What is bookkeeping, anyway?

Bookkeeping is the activity to record the economic events of an organization according to specific rules.
Strictly speaking, accounting involves the following 3 activities;

  1. Identifying relevant economic events
  2. Recording of those events
  3. Communicating the collected information to stakeholders
Out of the 3 activities of accounting, bookkeeping usually involves only the 2nd part.
However, though the exam is called the Bookkeeping certification exam, you will be required to answer questions on all activities of accounting,

Based on the data recorded by bookkeeping, 'financial statements' are created and reported to an organization's stakeholders such as its management, investors, and lenders.

Financial statements refers to a set of documents used to report an organization's financial status. A balance sheet and income statement are examples of financial statements. You might have seen them even if it is your first time to study bookkeeping.

Balance Sheet

A balance sheet is a snapshot of an organization's financial status on a specific date. For example, it can show how much assets and liabilities a company has on November 30, 2020.

Example of a balance sheet
Example balance sheet on Cagamee

Income statement

Unlike a balance sheet which is about a specific date, an income statement presents revenues and expenses for a specific period of time. For example, it can report the amounts of revenues, expenses,and resulting profits, between November 1st and 30th.

Example of an income statement
Example income statement on Cagamee

You can automatically generate financial statements if you use accounting software such as Cagamee. So try creating them in order to improve your understanding.