DEFINITION of 'Zero-Proof Bookkeeping'

Zero-proof bookkeeping is a manual bookkeeping procedure used in accounting in which posted entries are systematically subtracted from an ending balance to check for errors. In zero-proof bookkeeping, a balance of zero when all entries have been subtracted is proof that the accounting entries have been entered correctly. In this way, this practice is quite similar to keeping a balance sheet, which is a common financial statement issued by firms that balances assets with liabilities and shareholder's equity - such that subtracting the left side from the right side of the balance sheet results in a sum of zero.

Zero-proof bookkeeping is employed as part of a double entry bookkeeping system, where credits (assets) and debits (liabilities) are kept track of simultaneously.

BREAKING DOWN 'Zero-Proof Bookkeeping'

This method, used as part of a double entry bookkeeping system, may be used to reconcile accounting differences in situations where the number of entries or transactions is not overly large. A typical situation where zero-proof bookkeeping is used is by bank tellers to reconcile differences at the end of a day. Zero proof bookkeeping is not practical where large numbers of transactions are the norm and many of the figures are rounded. Thus, this practice is most often used by smaller businesses or for individual purposes.

Because zero-proof bookkeeping is carried out by hand, it is a laborious and time consuming process. It is also tedious in that the same sort of manual calculations must be carried out on a regular basis, for example at the end of each business day. Of course, this work can be augmented with the work of calculators or spreadsheets such as Microsoft Excel.

To start in the zeroing out process, the bookkeeper will first engage in "footing" the ledger. Footing here means summing up all of the numbers recorded in a single column of the accounting ledger. The resulting sum, which appears at the bottom ("foot') of the column is then used to reconcile against the other columns by comparing and subtracting debits from credits (cross-footing). An example of zero-proof bookkeeping in practice is the use of balance sheets by firms where shareholders' equity is used as a figure (either positive or negative) to balance assets with liabilities so that they add up to zero on net.

RELATED TERMS
  1. Trial Balance

    A trial balance is a bookkeeping worksheet in which the balances ...
  2. General Ledger

    A general ledger represents the formal ledger for a company's ...
  3. Accounting

    Accounting is the systematic and comprehensive recording of financial ...
  4. Administrative Accounting

    Administrative accounting handles and reports internal factors ...
  5. Closing Entry

    A closing entry is a journal entry made at the end of the accounting ...
  6. Reconciliation

    Reconciliation is an accounting process used to determine whether ...
Related Articles
  1. Investing

    Financial History: The Evolution Of Accounting

    Follow accounting from its roots in ancient times to the profession we now depend on.
  2. Small Business

    How to Outsource Work: 2 Tips for Business Owners

    Small business owner can increase efficiency and profits by outsourcing routine functions such as bookkeeping and payroll.
  3. Investing

    How to use Excel as a general accounting ledger

    Follow these steps to set up a general ledger accounting system in Excel. A small business can use Excel as a substitute for expensive accounting software.
  4. Tech

    The Best 5 Online Accounting Systems For Small Business

    Running a small business can be difficult, but thanks to these online accounting services, taking care of payroll doesn't have to be.
  5. Taxes

    4 Ways Business Owners Can Reduce Tax Time Stress

    Business owners who implement these strategies throughout the year will find filing taxes less stressful.
  6. Small Business

    The Importance of Small Business Forecasting

    Small businesses need forecasting to know what they can spend on future expansion and marketing.
  7. Personal Finance

    Accountant: Job Description & Average Salary

    Discover what the job description of an accountant entails, along with education and training, salary and skills necessary for success.
RELATED FAQS
  1. What's the difference between the general ledger and a general journal?

    Keeping records for most organizations require a double-entry bookkeeping system, which revolves around transactions in the ... Read Answer >>
  2. How do you calculate credits and debits in the general ledger?

    Know the key points when balancing a ledger and why it's essential to understand the relationship between credits and debits ... Read Answer >>
  3. How do you calculate shareholder equity?

    Shareholder equity is calculated by subtracting a company's total liabilities from its total assets. It's the amount remaining ... Read Answer >>
  4. How are the three major financial statements related to each other?

    Learn why investors analyze a company's financial statements, and how the income statement, balance sheet and cash flow statement ... Read Answer >>
  5. What are the most important steps in the accounting cycle?

    Understand the steps in the accounting cycle. Learn about each of the eight steps in the accounting cycle and why each one ... Read Answer >>
Trading Center