Importance Of Book Keeping

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1.2.2 Definition “Book-keeping is the art of recording business transactions in a systematic manner”. (A.H.Rosenkamph) “Book-keeping is the science and art of correctly recording in books of account all those business transactions that result in the transfer of money or money’s worth”. (R.N.Carter) 1.2.3 Objectives of Book-Keeping i. Book-keeping provides a permanent record of each transactions. ii. Soundness of a firm can be assessed from the records of assets and abilities on a particular date. iii. Entries related to incomes and expenditures of a concern facilitate to know the profit and loss for a given period. iv. It enables to prepare a list of customers and suppliers to ascertain the amount to be received or paid. v. It is a method…show more content…
Owners: The owners provide funds or capital for the organization. They possess curiosity in knowing whether the business is being conducted on sound lines or not and whether the capital is being employed properly or not. Owners, being businessmen, always keep an eye on the returns from the investment. Comparing the accounts of various years helps in getting good pieces of information. ii. Management: The management of the business is greatly interested in knowing the position of the firm. The accounts are the basis, the management can study the merits and demerits of the business activity. Thus, the management is interested in financial accounting to find whether the business carried on is profitable or not. The financial accounting is the “eyes and ears of management and facilitates in drawing future course of action, further expansion etc.” iii. Creditors: Creditors are the persons who supply goods on credit, or bankers or lenders of money. It is usual that these groups are interested to know the financial soundness before granting credit. The progress and prosperity of the firm, two which credits are extended, are largely watched by creditors from the point of view of security and further credit. Profit and Loss Account and Balance Sheet are nerve centers to know the soundness of the…show more content…
It helps in having complete record of business transactions. ii. It gives information about the profit or loss made by the business at theclose of a year and its financial conditions. The basic function ofaccounting is to supply meaningful information about the financial activities of the business to the owners and the managers. iii. It provides useful information form making economic decisions, iv. It facilitates comparative study of current year’s profit, sales, expensesetc., with those of the previous years. v. It supplies information useful in judging the management’s ability to utilize enterprise resources effectively in achieving primary enterprisegoals. vi. It provides users with factual and interpretive information about transactions and other events which are useful for predicting, comparing and evaluation the enterprise’s earning power. vii. It helps in complying with certain legal formalities like filing of income-tax and sales-tax returns. If the accounts are properly maintained, the assessment of taxes is greatly facilitated. 1.3.7 Limitations of Accounting i. Accounting is historical in nature: It does not reflect the current financialposition or worth of a
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