Answer the following questions :
Explain the importance and utility of Book-keeping.
Explain the importance and utility of Book-keeping.
Importance of Book-keeping
1. Limitation of human memory: It is beyond human capacity to memorise a large number of business transactions. Thus, book-keeping helps in recording such a large number of transactions in a well-organised manner that minimises the probability of erroneous and faulty results.
2. Need for financial information: Financial information is required for making various important decisions in business. Book-keeping records all the financial information as required by the business.
3. Determination of tax liability: A systematic record of business activities helps in ascertaining the tax liabilities of business.
4. Preparation of financial statement: All the financial information recorded via book-keeping helps in preparation of financial statements, i.e. Profit and Loss Account and Balance Sheet.
5. Enables comparative study: By keeping a systematic record, it helps owners to compare a particular year’s costs, expenses, sales etc. with those of other years.
Utility of Book keeping
1. Owners: Book-keeping helps in assessing the financial status and health of a business.
2. Management: It helps management in enhancing the efficiency of a business and also to implement various cost-controlling measures to remove inefficiencies.
3. Consumers: Transparent financial records assist customers in finding out the correct cost of production and, accordingly, assess the degree of reasonability of the price charged by the business for its products.
4. Government: The accounting information assists the government in the formulation of various policies and measures and to address various economic problems such as unemployment, poverty, etc.
5. Investors: It helps in assessing the profitability and solvency position of a business.
1. Limitation of human memory: It is beyond human capacity to memorise a large number of business transactions. Thus, book-keeping helps in recording such a large number of transactions in a well-organised manner that minimises the probability of erroneous and faulty results.
2. Need for financial information: Financial information is required for making various important decisions in business. Book-keeping records all the financial information as required by the business.
3. Determination of tax liability: A systematic record of business activities helps in ascertaining the tax liabilities of business.
4. Preparation of financial statement: All the financial information recorded via book-keeping helps in preparation of financial statements, i.e. Profit and Loss Account and Balance Sheet.
5. Enables comparative study: By keeping a systematic record, it helps owners to compare a particular year’s costs, expenses, sales etc. with those of other years.
Utility of Book keeping
1. Owners: Book-keeping helps in assessing the financial status and health of a business.
2. Management: It helps management in enhancing the efficiency of a business and also to implement various cost-controlling measures to remove inefficiencies.
3. Consumers: Transparent financial records assist customers in finding out the correct cost of production and, accordingly, assess the degree of reasonability of the price charged by the business for its products.
4. Government: The accounting information assists the government in the formulation of various policies and measures and to address various economic problems such as unemployment, poverty, etc.
5. Investors: It helps in assessing the profitability and solvency position of a business.
