Household Accounts: Records relating to current cash expenditure from money income are commonly called household account.
Account keeping system: There are four types of accounting system
Sheet method
Envelop method
Notebook method
Card filling method
Sheet method: Here records of expenditure may be kept on loose sheets. In this simple method the records of expenditure may be kept on a single , double or multiple sheets. It is convenient to use since the sheet can be tacked on the back of the board, the end of a cabinet /back of a door hung along with pencil. This method is simple and flexible. In single sheet method all items of expenditures, total income, taxes and savings are noted on a single sheet. In double sheet method savings and taxes and saving are noted on a single sheet. In double sheet method savings and taxes are noted on one sheet and income and expenditure on the other sheet. In multiple sheet one sheet each is allocated for each of the items mentioned above. Double and multiple sheets are better than single sheet method.
Envelope method: Two types of envelop systems are possible here they are
-Cash payment method and - Pure sheet accounting system In cash payment system money is divided into
Previously planned amounts and
Money for each group. It is placed in separate envelope to be dispersed as and when the need arise (e g: food, housing etc) Total money and expenditure can be specified on the cover. This system could be used by people who receive their weekly wages and who operate mostly on a cash method of payment.
Advantages of this method: 1. This system brings planning and accounting close together. 2. For people whose resources are meager the system is direct and simple, highly flexible, adequate and convenient if money for change is anticipated and supplied. The drawbacks of the systems are that for families working with higher sum it may be unsafe to have much money lying in envelopes even if under lock and key and secondly keeping such large cash might prove inconvenience. Cheque payments are definitely more convenient and safe from all points of view where large amount are involved. In the pure sheet accounting: a big envelop is made and all bills, slips and notations are put in it. Totaling and summarizing the amount is done on the outside cover. The system is simple, flexible and convenient. It is likely to be adequate because if there is not enough area on the outside of envelop. The disadvantage is that in the end, the home maker will have to put in several hours of work sorting out the bills and writing down the various items. Further if any bill is lost then there will be nothing to show that an item of expenditure has been missed.
Notebook method:
Household accounts may be kept either a bound or loose –leaf note books. Loose –leaf book are very convenient and it has the advantage of being more flexible because new pages can be added and old ones replaced whenever necessary. And if any age has been used wrongly it can be removed. If this type of book is used , one with metal strip fasteners will be found to be more durable than the ring type. The spiral note book is a type of bound book. Note books are convenient when children are helping in account keeping, for they are sturdy/durable and will withstand much handling. The note books system demands planning of the type of accounts to be kept. The family will have to judge what items occur frequently so that sufficient space if there for them and what occur less frequently, so that they can be grouped together.
Card file account system:
This is highly flexible method, since card can be kept for each type of expenditure. It can be adequate, but it may not be simple or convenient for a person not highly conscious of organization. If children are to aid in accounting the card file is inadvisable because of the possibility of mixing cards or even scattering them. It is convenient when one individual is in charge of all the accounts. But this might be useful for families which are also doing business and where household accounts are important also from the tax point of view.
Ledger:
A ledger is permanent record showing assets and liabilities of a family. It holds full dates for identifying of assets and liabilities. Current household expenditure accounts are recorded in ledger. However it may not be suitable for recording household accounts since the family assets and liabilities are not much to be recorded or reported. It is most suitable for open accounts for the services and goods used by the business or professional people.
Balance sheet/The Net-worth
It is a computation of the value of all assets and of the value of all liabilities (indebtedness) arranged to show that the two values are balanced against each other. It is thus both a process and a record. Assets are all the things which are owned by the family. Liabilities are what the family owes to others. i.e. all the loans and debts which the family has to repay. It is useful in both short term and long term planning computation of net worth of the family each year. Net worth is the difference between what the family owns and what it owes. The importance of net-worth calculation cannot be over stated from the point of view of its supplying vital data for family financing. In fact, many would say that it is the single most important financial record for the family, because it gives basic information at least once a year on their economic status.
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