Book Keeping Meaning – Introduction, What is ? (All Details)
Book Keeping Represent all documents in business which contains financial records and act as evidence of the transactions which have taken place. Book-Keeping 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.
As defined by Carter, ‘Book-keeping is a science and art of correctly recording in books-of accounts all those business transactions that result in transfer of money or money’s worth’.
Book-keeping is an activity concerned with recording and classifying financial data related to business operation in order of its occurrence.
Book-keeping is a mechanical task which involves:
- Collection of basic financial information.
- Identification of events and transactions with financial character i.e., economic transactions.
- Measurement of economic transactions in terms of money.
- Recording financial effects of economic transactions in order of its occurrence.
- Classifying effects of economic transactions.
- Preparing organized statement known as trial balance.
The distinction between book-keeping and accounting is given below:
Difference between Book-keeping and Accounting
|Output of book-keeping is an input for accounting.||Output of accounting permit informed judgments and decisions by the user of accounting information.|
|Purpose of book-keeping is to keep systematic record of transactions and events of financial character in order of its occurrence.||Purpose of accounting is to find results of operating activity of business and to report financial strength of business.|
|Book-keeping is a foundation of accounting||Accounting is considered as a language of business.|
|Book-keeping is carried out by junior staff.||Accounting is done by senior staff with skill of analysis and interpretation.|
|Objects of book-keeping is to summarize the cumulative effect of all economic transactions of business for a given period by maintaining permanent record of each business transaction with its evidence and financial effects on accounting variable.||Object of accounting is not only bookkeeping but also analyzing and interpreting reported financial information for informed decisions.|
Book Keeping in Simple
Accounting and book-keeping are not one and the same. Accounting is a wider term. Accounting includes Book Keeping
Book keeping is an activity concerned with the recording of financial data relating to business operations in a significant and orderly manner. It covers procedural aspects of accounting work and embraces record keeping function. Obviously book-keeping procedures are governed by the end product, the financial statements. In India, the term ‘financial statements’ means Profit and Loss Account and Balance Sheet including Schedules and Notes forming part of Accounts. As discussed earlier, Profit and Loss Account gives result of economic activities for a period and Balance Sheet states the financial position at the end of the period.
Book-keeping also requires suitable classification of transactions and events. This is also determined with reference to the requirement of financial statements. A book-keeper may be responsible for keeping all the records of a business or only of a minor segment, such as position of the customers’ accounts in a departmental store. A substantial portion of the book-keeper’s work is of a clerical nature and is increasingly being accomplished through the use of a mechanical and electronic devices. Accounting is based on a careful and efficient book keeping system.
The essential idea behind maintaining book-keeping records is to show correct position regarding each head of income and expenditure. A business may purchase goods on credit as well as in cash. When the goods are bought on credit, a record must be kept of the person to whom money is owed. The proprietor of the business may like to know, from time to time, what amount is due on credit purchase and to whom. If proper record is not maintained, it is not possible to get details of the transactions in regard to the expenses. At the end of the accounting period, the proprietor wants to know how much profit has been earned or loss has been incurred during the course of the period. For this lot of information is needed which can be gathered from a proper record of the transactions. Therefore, in book-keeping, the proper maintenance of books of account is indispensable for any business.