A business undertakes a large number of transactions. Can you estimate the number of transactions a business undertakes? It depends upon the size of a business entity.
Everyday business transactions may be around hundreds/thousands. Can a businessman remember all these transactions in every respect? Not at all. So it becomes necessary to record these business transactions in detail and in a systematic manner.
Recording of business transactions in a clear and systematic manner in the books of accounts is called bookkeeping.
Book-keeping is concerned with identifying financial transactions; measuring them in monetary terms; recording in a systematic manner and classifying them.
In short “The art of keeping a permanent record of business transactions is called book-keeping”.
Definition of Bookkeeping
According to R.N. Carter
“Bookkeeping is the science and art of correctly recording in the books of account all those business transactions that result in the transfer of money or money’s worth”.
According to J. R. Batliboi
“Bookkeeping is the art of recording business dealings in a set of books.”
According to Northcott
“BookKeeping is an art of recording in the books of account the monetary aspect of commercial and financial transactions.”
According to A.N. Rosen Kampff
“Bookkeeping is the art of recording business transactions in a systematic manner.”
According to J.k. Bhardwaj
“Bookkeeping is the process of recording the financial transactions and events of a business in a clear and systematic manner in the books of accounts according to the rules and according to the principles.”
Bookkeeping Involves the following four activities-
- Identification of financial transactions and events;
- Measuring of transactions in monetary terms;
- Recording the financial transactions and events in journal and subsidiary books according to the rules and according to the principles;
- Classifying recorded transactions and events,i.e., posting them into ledger.
11 Features of Bookkeeping
- It is concerned with identifying financial transactions; measuring them in monetary terms; recording and classifying them.
- It is to maintain systematic records of financial transactions.
- It is to record business transactions. So its scope is limited.
- Vouchers and other supporting documents are necessary as evidence to record the business transactions.
- Book-keeping is the first step to accounting.
- Book-keeping is an art as well as a science.
- Book-keeping is concerned with monetary transactions.
- Transactions are recorded in certain prescribed books(Journal and Subsidiary books).
- All the Transactions are written in the books of accounts regularly and date-wises.
- BookKeeping is concerned with the recording of financial data in the books of accounts.
- Bookkeeping is a part of accountancy.
Objectives of bookkeeping
The objectives of bookkeeping are-
- The main aim is to maintain systematic records of financial transactions and events.
- For having a permanent record of all the business transactions and activities.
- For keeping records of income and expenses in a way that the net profit or the net loss can be calculated.
- To keep a continuous record of assets and liabilities in such a way as to ascertain the financial position of the business.
- To keep the record of names of the customers and the amount due from them.
- To keep the record of the names of suppliers and the amount due to them.
- To have essential financial information for legal and tax purposes.