WHAT IS BOOKKEEPING?
Penaflor, Micaella Mariz F.
H-328
1. WHAT IS BOOKKEEPING?
* Bookkeeping is the recording, on a day-today basis of the financial transactions and information pertaining to a business. It is concerned with ensuring that records of those individual financial transactions are accurate, up-to-date and comprehensive. Accuracy is therefore vital to the process. * Bookkeeping provides the information from which accounts are prepared but is a distinct process, preliminary to accounting.
2. WHY IS BOOKKEEPING IMPORTANT?
The importance of Book-keeping are as follows:
* Limitation of human memory:
Capacity of human beings is limited as to how much one can remember and that too for how long? Proper according records do away with the need of remembering. * Owners and managers being different persons:
Written records supported by documentary evidence are essential to avoid any mistrust or doubt among owners and managers. * Preparation of financial statements:
Business wants to know the profit earned or loss suffered during the year and its financial position at the end of the year. This is disclosed by income statement (Trading and Profit and Loss Account) and position statement (Balance Sheet) respectively. Book-keeping records provide necessary data for preparing these statements. * Need for financial information:
Financial information and data are needed for cost ascertainment, planning, budgeting and forecasting. Records maintained by book-keeping are the source of such information. * Need of taxation authorities:
Book-keeping records are regarded by the tax authorities as authentic and reliable for determining tax liability.
3. WHAT IS ACCOUNTING?
* The systematic recording, reporting, and analysis of financial transactions of a business. The person in charge of accounting is known as an accountant, and this individual is typically required to follow a set of rules and regulations, such as the Generally
H-328
1. WHAT IS BOOKKEEPING?
* Bookkeeping is the recording, on a day-today basis of the financial transactions and information pertaining to a business. It is concerned with ensuring that records of those individual financial transactions are accurate, up-to-date and comprehensive. Accuracy is therefore vital to the process. * Bookkeeping provides the information from which accounts are prepared but is a distinct process, preliminary to accounting.
2. WHY IS BOOKKEEPING IMPORTANT?
The importance of Book-keeping are as follows:
* Limitation of human memory:
Capacity of human beings is limited as to how much one can remember and that too for how long? Proper according records do away with the need of remembering. * Owners and managers being different persons:
Written records supported by documentary evidence are essential to avoid any mistrust or doubt among owners and managers. * Preparation of financial statements:
Business wants to know the profit earned or loss suffered during the year and its financial position at the end of the year. This is disclosed by income statement (Trading and Profit and Loss Account) and position statement (Balance Sheet) respectively. Book-keeping records provide necessary data for preparing these statements. * Need for financial information:
Financial information and data are needed for cost ascertainment, planning, budgeting and forecasting. Records maintained by book-keeping are the source of such information. * Need of taxation authorities:
Book-keeping records are regarded by the tax authorities as authentic and reliable for determining tax liability.
3. WHAT IS ACCOUNTING?
* The systematic recording, reporting, and analysis of financial transactions of a business. The person in charge of accounting is known as an accountant, and this individual is typically required to follow a set of rules and regulations, such as the Generally