MEANING AND DEFINITIONS OF BOOK-KEEPING
Book-keeping is an act of keeping written records of the financial transactions of a business. An owner or an accountant cannot keep in memory all the financial transactions that take place in the business for the whole year. Therefore, all such transactions have to be recorded in some books for future purposes. Bookkeeping keeps records of financial transactions systematically in chronological order for the purpose of future use. Formally, book-keeping may be defined as the art of making routine records of day-to-day financial transactions of a business in a prescribed form and according to a set of rules. The following are some famous definitions of book-keeping:
A. H. Rosenkampff: ‘Book-keeping is the art of recording business transactions in a systematic manner.
R. N. Carter: ‘Book-keeping is the science and art of correctly recording in books of accounts, all those business transactions that result in the transfer of money or money’s worth‘.
L. C. Cropper: ‘Book-keeping may be defined as the science of recording transactions in money or money’s worth in such a manner that, at any subsequent date, their nature and effect may be clearly understood and that, when required, a combined statement of their result may be prepared‘.
J. R. Batliboi: ‘Book-keeping is the art of recording business dealings in a set of books‘.
It is clear from the above definitions that book-keeping is a body of knowledge that is concerned with the recording of financial transactions of a business in a set of books systematically in chronological order as and when they take place with a view to preparing some further statements.
Things To Remember
Book-keeping is a branch of knowledge, which is concerned with the recording of financial transactions of a business in a set of books systematically in chronological order as and when they take place with a view to preparing further statements.
OBJECTIVES OF BOOK-KEEPING
The following are the important objectives of book-keeping:
To identify financial transactions:
Book-keeping identifies financial transactions number of business transactions to keep their record.
To keep permanent records:
It keeps permanent records of financial transactions as and when they arise in a systematic order.
To classify transactions:
It classifies all financial transactions into three types — personal, real, and nominal and records them accordingly in a permanent book.
To prepare statements:
It helps to prepare different statements to summarize, present and interpret the financial information contained in the routine records.
THINGS TO REMEMBER (TTR)
The principal objectives of book-keeping are:
- To identify financial transactions
- To keep permanent records
- To classify transactions
- To prepare statements
