Book keeping-

                               In simple words the term 'book-keeping' means recording of the business transactions in the book of accounts.  ( The book kept for entering the transactions are called the book of accounts). But when the term is used as a system of way of writing the book of accounts. It is defined as under -


 Definition of book keeping -

                               " Book keeping is a scientific method of recording day to day business transactions in words and figures in the book of account so as to show correctly and clearly the financial position of a business."

     The record of transactions should be complete and properly set that they can give maximum information with the minimum trouble. One must understand the nature of the transaction correctly and clearly by reading the record that transaction.


 Object of Book-keeping -
                        
                  1.   It is not possible to anyone to remember all transactions. One cannot rely only one's memory. Further memory cannot accepted as an evidence in the legal case. Book-keeping serves as a permanent record of the business dealing and it can be produced as an evidence whenever and wherever required. 
                 
                    2. A trader can know....
                                            (i) What he owes to others and what owe to him and;
                                            (ii) The value of the various classes of property in his business.

               
                     3. It enables a trader to ascertain his trading result. i.e. Profits earned or losses sustained by his business , and to know the financial position of his business on a particular day.

                  
                      4. To meet the requirements of certain laws


Importance and utility of Book keeping -
                

                         Though book keeping  is not made compulsory in respect of all types of business by statute, the maintenance of book accounts is essential in respect of every business for the following reasons.

                       1) In the absence of book-keeping nobody can carry out the business successfully. He will not be in position to know where he stands. He cannot know whether his business is profitable or unprofitable . He cannot ascertain the total amount of his capital and how it made up.

 
                       2) Book keeping enables the executives of the business to control the activities of the business . The executives of the business arrive of certain conclusions by reading the accounts of business  i.e. a sale manager can ascertain whether a particular customer is a regular purchaser, prom in payment, worthy of extending credit facility etc. by reading the account of that costumer.



                       3) For the correct assessment of income-tax , sales-tax, custom duty etc. The book of account are required to be maintained and produced as an evidence in the respective departments of the government.



                       4) The business are required very often to take loans from  bank or other financial institutions. In order to ascertain credit worthiness of the applicants , the lender require to go through  the account of the applicants .After having studied the accounts carefully the lenders take a decision in respect of granting loans, cash credit etc.


                        5) If a legal action is required to be taken against any customer, for recovery of debt due from him , the book of accounts are required to be produced in the court as an evidence.


                         6) In case of Insolvency the court may refuse or suspend the discharge of an insolvent who can not produce book of accounts.

                         
                         7) For ascertaining the value of the business in case of admission of a partner or amalgamation or sale of business, the book of accounts are required to be investigated.

 
                          8)  Maintenance of books of accounts has been made compulsory in respect of companies by the companies Act, to safeguard the interest of the parties who have financial stake in the company.



                           9) In support of insurance claim lodged with the insurance company the relevant account are required to  insurance company.

                     
                            10) Even the government is required to publish the account the accounts of the last year at the time of placing the budget before the house for discussion and approval.



       The importance of book-keeping in the recent days is quite clear, from the above points Maintenance of book of accounts is not a question of ones will but it has become an indispensable   requirement of any type of business. It may be an individual or government - whoever is having  dealing money or moneys worth - is required to maintain the accounts to achieve the pre-determined objectives successfully . In short it can be said that to run a business without maintaining accounts is to get Sailing without a Rudder...

    

  
  

                                   

1 comments:

Post a Comment

See Also..