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:
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Sales (cash and credit)
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Purchases (inventory, services, assets)
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Payments (to suppliers, for expenses, taxes)
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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:
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Assets (cash, receivables, inventory, equipment)
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Liabilities (loans, payables, taxes owed)
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Income (sales, service income, commissions)
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Expenses (rent, utilities, salaries, office supplies)
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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:
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Cash Ledger
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Accounts Receivable Ledger
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Sales Ledger
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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:
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Total Debit: PKR 160,000
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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:
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Automatic bank feeds and reconciliations
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Built-in compliance with sales tax and withholding tax rules
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Real-time dashboards and reporting
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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
