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Book keeping is an activity concerned with the recording of financial data relating to business operation in a significant and orderly manner. It covers procedural aspects of accounting work and embraces record keeping function. Obviously book keeping procedures are governed by the end product, the financial statements. The term ‘financial statement’ means profit and loss account and balance sheet. Profit and loss account gives result of economic activities for a period and balance sheet states the financial position at the end of the period. Book keeping also requires suitable classification of transactions and events. This is also determined with reference to the requirement of financial statements. A book keeper may be responsible for keeping all the records of a business or only of a minor segment, such as position of the customers’ accounts in a departmental store. A substantial portion of the book keeper’s work is of a clerical nature and is increasingly being accomplished through the use of mechanical and electronic devices. Accounting is based on a careful and efficient book keeping system.
The essential idea behind maintaining book keeping records is to show correct position regarding each head of income and expenditure. A business may purchase material on credit as well as in cash. When the materials are bought on credit, a record must be kept of the person to whom money is owed. The owner of the business may like to know, from time to time, what amount is due to get details of purchase and to whom. If proper record is not maintained, it is not possible to get details of the transactions in regard to the expenses. At the end of accounting period, the owner wants to know how much profit has been earned or loss has been incurred during the course of the period. For this lot of information is needed. This can be gathered from a proper record of the transactions. Therefore, book keeping, the proper maintenance of books of account in indispensable for any business.
Objectives of book keeping:
1. Complete Recording of Transactions:
2. Ascertainment of Financial Effects on the Business: It is concerned with the combined effect of all the transactions made during the accounting period upon the financial position of the business as a whole.
It is concerned with complete and permanent record of all transactions in a systematic and logical manner to show it financial effect on the business.
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ReplyDeleteBookkeeping involves the recording, storing and retrieving of financial transactions for a company, nonprofit organization, individual, etc.
ReplyDeleteCommon financial transactions and tasks that are involved in bookkeeping include:
--Billing for goods sold or services provided to clients.
--Recording receipts from customers.
--Verifying and recording invoices from suppliers.
--Paying suppliers.
--Processing employees' pay and the related governmental reports.
--Monitoring individual accounts receivable.
--Recording depreciation and other adjusting entries.
--Providing financial reports.
Bookkeeping requires knowledge of debits and credits and a basic understanding of financial accounting, which includes the balance sheet and income statement.
Source: Professional Los Angeles Accounting