Book Keeping and Accountancy

Introduction:

Book-keeping is related with recording of business transactions. Business enterprise and other
organizations deal in activities which involve exchange of money or money’s worth. All these
activities are recorded for the purpose of taking important decisions as to whether the activities are
feasible, profitable and are to be continued or not. Information about the business and other
organizations is required not only by the proprietors and managers of business and other
organisations but also to various other stakeholders such as the government, investors, customers,
employees and researchers.

With proper bookkeeping, companies are able to track all information on its books to make
key operating, investing, and financing decisions.
Bookkeepers are individuals who manage all financial data for companies. Without
bookkeepers, companies would not be aware of their current financial position, as well as
the transactions that occur within the company.
Importance of Bookkeeping
Proper bookkeeping gives companies a reliable measure of their performance. It also
provides information to make general strategic decisions and a benchmark for its revenue
and income goals. In short, once a business is up and running, spending extra time and
money on maintaining proper records is critical.
Many small companies don’t actually hire full-time accountants to work for them because of
the cost. Instead, small companies generally hire a bookkeeper or outsource the job to a
professional firm. One important thing to note here is that many people who intend to start
a new business sometimes overlook the importance of matters such as keeping records of
every penny spent.
Meaning and Definition:

In simple words, the ‘Book-keeping’ means recording of the business transactions in the books of
accounts in a systematic way. All the monetary transactions are recorded datewise for accurate
business results from such records at the end of accounting year. Book-keeping is an art or science of
systematic recording, classifying and summarising the financial transactions of business for a
particular period, generally one year.

Definition of Book-Keeping

Richard E. Strahelm : “The art of analyzing and recording business transactions, reporting results of
business operations through periodic statements and interpreting such results for purposes of
effective control of future operations.”

J. R. Batliboi “Book-keeping is an art of recording business dealings in a set of books.”

Nocth Cott: “Book-keeping is an art of recording in the books of accounts the monetary aspects of
commercial or financial transactions.”

R.N. Carter : “Book-keeping is the science and art of correctly recording in the books of accounts, all
those business transactions that results in transfer or money or money’s worth.”
Features of Book-keeping:

1) It is the method of recording day to day business transactions.

2) Only financial transactions are recorded.

3) All records are prepared for a specific period which are useful for future references.

4) Records of transactions are based on rules and regulations.

5) It is an art of recording business transactions scientifically.

Objectives of Book-keeping:

1) The main objective of book-keeping is to keep a complete and accurate record of all the financial
transactions in a systematic, orderly and logical manner.

2) All the business transactions are to be recorded date wise and account wise.

3) Book-keeping serves as a permanent record of the monetary transacitons of an enterprise

4) To know the profit or loss of the business during the financial year.

5) To know the total assets and liabilities of the enterprise.

6) To know what the businessman owes to others and what others owe to him.

7) Businessman comes to know the current year’s progress over previous year and compares its
financial results with other business enterprise in similar line.

Importance of Book-keeping:

1) Record : It is not possible for anyone to remember all transactions. But Book-keeping maintains
records of all the transactions permanently and systematically in the books of accounts.

2) Financial Information: Book-keeping is useful to get information related to Profit, Loss, Assets,
Liabilities, Investments and Stock, etc, at any given time.

3) Decision Making: Book-keeping provides financial information to the businessman for decision
making.

4) Controlling: Book-keeping enables the executives of the business to control the activities of the
business.

5) Evidence: Businessman needs financial evidence to be produced in the Court of law in case of any
disputes.

6) Tax Liability: Book-keeping is useful to find out the tax liabilities e.g. : Income Tax, Property Tax,
GST, etc.

Utility of Book-keeping:

1) Owner: The businessman can find out Profit, Losses, Assets and Liabilities of an enterprise at any
time.

2) Management: Management of an enterprise can plan, take decisions and control overall business
activities.
3) Investors: Investors can take proper decisions whether to invest or not.

4) Customer: Customer can easily understand financial position of the business. He can be assured
about supply of goods.

5) Government: Government can easily find out different types of taxes due from various sources.

6) Lenders: Money Lenders can find financial standing of the enterprise for decision to lend money
or not.

7) Development: Business enterprise can achieve the business growth with the help of accounting.

Difference between Book-Keeping and Accountancy