HOW TO DO BOOKKEEPING IN PAKISTAN? (ACCOUNTANT)

Bookkeeping is the foundation of financial management in any business. It involves systematically recording, classifying, and maintaining all financial transactions to provide a clear picture of the company’s financial health. In Pakistan, accurate bookkeeping is not only essential for informed business decisions but also for complying with tax regulations set by the Federal Board of Revenue (FBR) and, in the case of companies, the Securities and Exchange Commission of Pakistan (SECP).

Here’s how an accountant in Pakistan would typically perform the bookkeeping process for a small or medium-sized business.

Record Transactions

The first step in bookkeeping is to record every financial transaction that occurs. This includes:

  • Sales (cash and credit)

  • Purchases (inventory, services, assets)

  • Payments (to suppliers, for expenses, taxes)

  • Receipts (from customers, loans, investments)

Each transaction should be supported with documentation such as invoices, receipts, bank statements, bills, and contracts. In Pakistan, it is recommended to record transactions daily using either manual ledger books or accounting software like QuickBooks, Xero, Zoho, or locally used software such as Peachtree.

Classify Transactions

Next, each transaction must be classified into proper accounts. Common classifications include:

  • Assets (cash, receivables, inventory, equipment)

  • Liabilities (loans, payables, taxes owed)

  • Income (sales, service income, commissions)

  • Expenses (rent, utilities, salaries, office supplies)

  • Equity (owner’s capital, drawings, retained earnings)

Classification ensures that transactions are grouped correctly for preparing reports and financial statements.

Journalize Transactions

After classification, each transaction is entered into the journal, which records them in chronological order. This step follows the double-entry bookkeeping system, where every transaction has both a debit and a credit.

Example – January Transactions:
• Sold goods worth PKR 50,000 on credit
• Purchased goods worth PKR 30,000 on credit
• Paid PKR 10,000 in rent
• Received PKR 15,000 in cash from a customer

Journal Entries:

Debit Credit
Accounts Receivable 50,000 Sales 50,000
Purchases 30,000 Accounts Payable 30,000
Rent Expense 10,000 Cash 10,000
Cash 15,000 Accounts Receivable 15,000

Journalizing helps in creating an audit trail and ensures proper historical tracking of business activities.

Post Transactions to Ledger Accounts

After journal entries are made, they must be posted to the General Ledger, which aggregates entries by account. Each ledger account shows all the activity related to a specific item, such as:

  • Cash Ledger

  • Accounts Receivable Ledger

  • Sales Ledger

  • Rent Expense Ledger

The ledger provides the final balances of all accounts, which are then used to prepare the trial balance and financial reports.

Prepare Trial Balance

A trial balance is a list of all general ledger accounts with their respective debit and credit balances. This ensures that the books are balanced and no mathematical errors exist.

Ledger Account Trial Balance Example:

Ledger Account Debit Balance Credit Balance
Cash PKR 25,000 PKR 15,000
Accounts Receivable PKR 65,000 PKR 65,000
Purchases PKR 30,000 PKR 0
Rent Expense PKR 10,000 PKR 0
Sales PKR 0 PKR 50,000
Accounts Payable PKR 0 PKR 30,000

Totals:

  • Total Debit: PKR 160,000

  • Total Credit: PKR 110,000

In this example, there is a discrepancy, indicating an error. A correct trial balance should have equal debit and credit totals, which confirms accurate posting and journalizing.

Maintain Financial Records for Compliance

In Pakistan, businesses must retain all books of accounts, vouchers, and supporting records for six years under Section 174 of the Income Tax Ordinance, 2001. Companies registered under SECP must also comply with Companies Act, 2017, and follow International Financial Reporting Standards (IFRS).

Use of Software and Automation in 2025

Modern bookkeeping in Pakistan is increasingly shifting towards automation and cloud-based solutions. Key advantages of using bookkeeping software include:

  • Automatic bank feeds and reconciliations

  • Built-in compliance with sales tax and withholding tax rules

  • Real-time dashboards and reporting

  • Integration with payroll, invoicing, and inventory modules

Popular tools in 2025 include QuickBooks Online, Wave, Odoo, SAP Business One, and local platforms like ERPNext Pakistan Edition.

Importance of Accurate Bookkeeping

• Enables preparation of income statements, balance sheets, and cash flow statements
• Helps assess profitability, solvency, and liquidity
• Ensures smooth tax filing with FBR via the IRIS portal
• Facilitates audits and financial analysis
• Aids in budgeting and forecasting for business growth
• Builds financial transparency for potential investors, lenders, and partners

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