Q: Book-keeping is an analyzing function. It is done by bookkeepers, who do not require any special skill or knowledgeĪccountants, on the other hand, require special accounting knowledge and skills Managers do not take decisions on the basis of bookkeeping recordsĪccounting records are used to assist managers in making decisionsĪccounting has branches such as Cost Accounting, Management Accounting, etc Preparing financial statements is the ultimate aim of accounting It is the basis of the process of accountingĪccounting is the basis for the Business Languageįinancial statements are not a part of the bookkeeping Payroll accounting and upkeep may also be clubbed in with book-keepingīook-keeping consists of recording financial transactions in a logical fashionĪccounting concerns itself with summarizing of such recorded financial transactions.Producing and organizing all source documents such as invoices.Posting debit and credits in the respective ledgers.Activities of Bookkeepingīook-keeping comprises of a lot of functions and activities bundled together. In such a case, book-keeping becomes mandatory. In the case of companies or banks or insurance companies, there are acts that require such firms to keep and maintain financial records. So at any time, the management of the company can determine which creditors owe them how much money by just looking at the records/accounts.Īlso, the maintenance of books of accounts and financial statements is a legal requirement in many cases. When a credit sale is made, the creditor’s account will be recorded. Each of these sale transactions will be recorded. Say for example a company makes sales in both cash and credit. Through book-keeping, detailed information about each expense or income could be obtained instantaneously. One of the main reasons for bookkeeping is so records can be maintained to show the financial position of each and every head/account of income and expenditure. Book-keeping will eventually ascertain the final accounts of the company, namely the Profit and Loss Account and the Balance Sheet. Then the second main objective is to ascertain the overall effect of all recorded transactions on the final statement of the company. This ensures that the financial effects of these transactions are reflected in the books of accounts. The main objective of book-keeping is to keep a complete and accurate record of all the financial transactions in a systematic orderly, logical manner. (Source: ) Browse more Topics under Meaning And Scope Of Accounting But even methods other than these, which involves the process of recording financial transactions in any manner are acceptable book-keeping systems or processes. The most common ones are the double-entry system and the single-entry system. It also involves preparing source documents for the financial transactions and other business operations being carried out. Such classification of transactions is essential to maintain proper financial accounts. It is a key component in forming the financial statements of the organization at the end of the financial year.īookkeeping also concerns itself with the classification of financial transactions and events. It is essentially a record-keeping function done to assist in the process of accounting. Bookkeeping is the activities concerned with the systematic recording and classification of financial data of an organization in an orderly manner.
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