Bookkeeping 101

WHAT IS BOOKKEEPING?

Generally, bookkeeping is the process of tracking changes in something. Most commonly it is a financial practice in which a data log is kept to record how much money went to where for what purpose and how much remains. 

Examples:

• Bank statements are a basic example of bookkeeping where a bank will summarize starting balance, all the transactions in a certain period, and the ending balance for their client.

• Airlines will bookkeep the passengers on a plane to know who flew on what plane and when.

• Many engineering designs will bookkeep things like mass in order to know the total loads on a structure and keep track of them as designs change and iterate.

WHY DO WE NEED TO BOOKKEEP?

Keeping a log of balances and transactions of different things can be critical for many reasons:

• Status 

  • • Without an accurate log of changes that have been made, it can be difficult or impossible to know how much of something you have left. A project that starts with $1,000 and then spends some money but doesn't keep track of how much won't know if they have enough left to finish the project. This may seem as simple as checking a balance on an account, but there are many cases where large projects may have joint accounts that make this much less trivial.

• Accountability

  • • At many times it can be critical to identify where money went or who changed something. Accurate bookkeeping and accounting are many times the primary defense against fraud and abuse. 

• Billing

  • • In many engineering contracts, clients are billed based on how many hours were worked and how much they spent, but there needs to be an accounting for this. For more more information hours bookkeeping, see Time Tracking. 

• Legal obligations

  • • Most businesses are required by governments across the globe to maintain accurate bookkeeping and accounting for many different purposes. Failure to perform this can result in steep fines, loss of licensees, and even jail time.

    • Typically financial books and records are kept to allow verification of appropriate taxation and legal business dealings. 

    • Things like hazardous chemicals or other dangerous items such as weapons are required to be accurately tracked and traced in order to verify conformance with regulations.

• Backtracking and problem-solving 

  • • There are many cases in engineering and computer science where accurate logs of what happened the history of a design, project, or data exchange play critical roles in solving design failures.

FINANCIAL BOOKKEEPING IN SENIOR DESGIN

There are a few types of bookkeeping you may encounter in senior design, but the most common is financial bookkeeping. Any team which is making (or simulating) financial exchanges in their project should be practicing at least basic bookkeeping.