Bookkeeping is an act of recording the financial transactions of the business. It is a part of accounting that identifies, summarizes and records the financial affairs of the firm. It provides monetary data and information that assists the management to make future financial plans.
Objectives Of Bookkeeping
Main purposes or objectives of bookkeeping can be studied as follows:
1. To Identify And Summarize The Transactions
Bookkeeping helps to identify the transactions of financial nature and summarize them systematically in a chronological order.
2. Recording Of Financial Transactions
Bookkeeping records all the financial transactions of business in a systematic order. Transactions are recorded permanently and can be used for future references,
3. To Provide Financial Information
Bookkeeping provides financial information of the business to the management and shareholders. It helps to make future plans and policies.
4. To Detect Errors And Frauds In The Business
Bookkeeping properly records the financial transactions of the business in a systematic and scientific manner. So, it helps to detect frauds and errors.
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5. To Know The Financial Position
Another objective of bookkeeping is to reveal the financial health (strength or weakness) of the firm. Actual financial position of the business can be known with the helps of different financial statements prepared on the basis of bookkeeping.
6. Helpful For Tax Purpose
Bookkeeping helps to determine tax liability of the business by providing essential financial data.
