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What Is Zero-Proof Bookkeeping?
Let me explain zero-proof bookkeeping directly: it's a manual accounting procedure where you systematically subtract posted entries from an ending balance to spot errors. If you end up with a zero balance after subtracting all entries, that's your proof that everything was entered correctly.
This approach is much like maintaining a balance sheet, which companies use to balance assets against liabilities and shareholders' equity—subtract the left side from the right, and you should get zero. Zero-proof bookkeeping fits into double-entry systems, where you track credits (liabilities) and debits (assets) at the same time.
Understanding Zero-Proof Bookkeeping
You can use this method in double-entry bookkeeping to reconcile differences when the number of entries isn't overwhelming. For instance, bank tellers often apply zero-proof bookkeeping to sort out discrepancies at the end of the day. It's not suitable for environments with massive transactions or rounded figures, so you'll see it more in smaller businesses or personal accounting.
Since it's done by hand, zero-proof bookkeeping is labor-intensive and time-consuming—you have to repeat these manual calculations regularly, like every business day. You can ease the burden with calculators or spreadsheets like Microsoft Excel, but the core process remains manual.
To begin the zeroing process, start by 'footing' the ledger, which means summing up all numbers in a single column. That footed sum at the bottom lets you reconcile by comparing and subtracting debits from credits through cross-footing. A practical example is how companies use balance sheets, where shareholders' equity balances assets and liabilities to net zero, positive or negative.
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