What is proof-free accounting?
Zero bookkeeping is a manual bookkeeping procedure used in bookkeeping in which posted entries are systematically subtracted from a closing balance to check for errors. In zero proof accounting, a balance of zero when all postings have been subtracted is proof that the ledger entries were entered correctly. In this way, this practice is quite similar to keeping a balance sheet, which is a common financial statement issued by companies that balances assets with liabilities and equity – so subtract the left side from the right side. of the balance sheet gives a sum of zero.
Zero-proof accounting is used as part of a double-entry accounting system, where credits (liabilities) and debits (assets) are tracked simultaneously.
Understanding Zero-Proof Accounting
This method, used in the context of a double-entry accounting system, can be used to reconcile accounting differences in situations where the number of postings or transactions is not too large. Bank tellers typically use trial-free accounting to reconcile differences at the end of a day. Zero-proof accounting is not practical where a large number of transactions is the norm, and many figures are rounded. Thus, this practice is most often used by small businesses or for individual purposes.
Since proof-free accounting is done by hand, this is a laborious and time-consuming process. It is also tedious as the same type of manual calculations have to be done on a regular basis, for example at the end of each working day. Of course, this work can be supplemented by the work of calculators or spreadsheets such as Microsoft Excel.
To begin the reset process, the accountant will first undertake to âtake stockâ of the general ledger. The foot here means summarizing all the numbers recorded in a single column of the ledger. The resulting sum, which appears at the bottom (“foot”) of the column is then used to reconcile the other columns by comparing and subtracting the debits from the credits (cross-footing). use of balance sheets by companies where equity is used as a number (either positive or negative) to balance assets with liabilities so that they add up to zero on the net.