The main objective of book keeping is recording various economic events systematically and chronologically. Apropos of book keeping, it has been defined as the art and science of recording business transactions in an orderly and chronological manner. The primary records that are used in the choresof book keeping are the Journal and Subsidiary books. The Records of all daily events of business are so maintained with the help of book keeping that at the end of the year the net profit or loss of a business may be ascertained and its financial position may be depicted in an accurate manner.Ifthere is no accuracy and no up-to-date records are maintained, it is impossible to determine whether a business is doing well in a way it has been expected of or it is leading to bankruptcy. In this way, the most important benefit of book keeping is obtained.Book Keeping provides the basis,from then on,the process of accounting and analysis and interpretation can be carried out and completed successfully.
One of the various advantages of book keeping is that it precludes the need of remembering business transactions by enabling one to preservethe records in an orderly manner. The permanent records and the records including the most recent events of business, having been maintained in an organized manner are available to serve the required purposes.
Under the provisions of law, the business has to file various statements for certain legal purposes. There must be a system that meets the legal requirements. Since the Statements are prepared on the basis of book keeping kept up methodically,which facilities for the purposetobe followed through accordingly. Moreover, there are times when the businessman or Financial manager needs toundertake a comparative study of the current and previous statements or it is with other organizations; there is a need to review or revise the policies. It is through the assistance of book keeping that these tasks are accomplished in an intended manner.
Being the art and science of recording numerous business transactions in a chronologicalorder as and when the business transactions take place, book keeping is of a great use to provide the basis and leading to prepare the income statement so that the net results, profit or loss of a business can be accurately calculated andascertained, while the depiction of financial position or a true picture of where the business stands or what it owns and owes can be known at any point of timefacilitating to preparethe balance sheet.
Having been associated with the task of book keeping, maintaining methodical records are advantageous in such a manner that, to a great extent, it will reduce the thefts and the frauds in a business. The importance of book keeping can be evidenced by a number of instances showing how it is capable of providing the source of each and every journal entry that paves the way for not only identifying the possibility of thefts and frauds but also to eliminate them.
To even a greater extent, the importance of book keeping may be acknowledged with respect of its required assistance to the management in the process of planning and reviewing and controlling and decision making. The task of maintaining permanent and methodical records is to be regarded as a helpful and reliable source to perform the above stated functions of management.
Mention deserves to be made about the individuals who perform the choresof book keeping. It is true of them that they are engaged on the activity that is regarded to be clerical in nature, but it must not hold in low esteem or it is not to be underestimated. Rather, it must be observed as a mandatory task to provide a starting point thereby the management can carry out subsequently required functions.As there is a need of strong base to the process of building a mansion of architectural beauty, so is there of book keeping to the process of financial accounting, reporting and analysis and interpretation.
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BBA; MBA-Finance; M.Phil-Financial Management; (PhD-Management)
Individual Member of Institute of Management Consultants of India