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What is the objective of book keeping
- To keep the financial record systematically by identifying the transactions of financial character amongst the various transactions of a business.
- To measure all financial transactions in monetary value.
- To record all financial transactions in the books of prime entry in chronological order.
- To record all financial transactions by classifying them as personal , real and nominal account.
- To keep all Records of financial transactions permanently for future reference.
Importance and advantages of book keeping
- It helps to ascertain the profit and loss of the business
- It helps to provide financial information and data for the purpose of cost ascertainment.
- It helps to provide financial information for planning, budgeting and forecasting.
- It helps to know the true and correct financial position of the business at any time.
- It helps to provide information to ascertain tax liability such as sales tax, property tax, VAT etc. to the government.
- It Records all financial transactions systematically and chronologically so it is detect frauds and errors.
- It is helpful to Present the financial information to business owners and other stake holders.
Functions of accounting
a.To Record business transactions:
The main and primary function of accounting is keep systematic record of business transaction which can be expressed in terms of money.
To fulfill Legal requirement:
It shows financial position of a business by preparing balance sheet at he end of the year. Balance sheet is shown the financial strength and weakness of a business.
To analyse and interpret of financial information:
Accounting is not only recording, measuring, identifying and summarizing the financial records. It is Also analyse and interpret the financial information with the help of profitability liquidity and financial position.
TO Help management
Accounting provides such information which is great importance for the management to make any decision which is mainly based on the result disclosed be accounting.
To protect assets:
A system of accounting protects assets from unauthorized use. Assets will be used only in the interest of the enterprise if accounts are properly kept. All this is possible through proper accounting.
Limitations of accounting
Accounting is useful for every part and sectors but it has some of the limitations which are as follows:
- Accounting ignores all non-financial information although they affect the financial soundness of business.
- Almost every day the prices of things or services are changing but accounting does not take this into consideration.
- Accounting recognizes certain intangible assets which may not have real value. These assets are goodwill, patents Trade marks, discount on issue of shares etc.
Scope of accounting
The scope of accounting is unlimited because it is useful for every part and sectors which are do transactions or actions. The Scope of accounting is very wide in the sense that , it is not only useful to the trading concerns but also to the non trading organizations, professionals, individual and even to the government. It can be Described as belows
i. Helps to Trading concern: Accounting is essentially important to a trading concern for keeping the complete records of the transactions. It helps to find out the result of operation and financial position.
ii.Helps to Non trading concern: Non-Trading concerns are established for service motive. They have to keep Records to carry out their operations efficiently. For this Purpose, They Prepare, Receipt and payments, income and expenditure and balance sheet.
iii.Helps to Individuals and Professionals : Accounting Helps to the Professionals like Doctors, teacher, Accountant etc. For Recording their income and expenditure. Similarly, it helps to individual for making a proper balance of their income and expenditure for their personal and house hold affairs.
iv. Helps to the Government: Helps To the Government. It is Considered as memory center, The documenting proof of activities, Decision making tools etc. Of the government.
Difference Between Book Keeping and Accounting
|Book Keeping is defined as the process of Recording business transactions in the books of account in a systematic manner||Accounting may be defined as the identifying, measuring, recording and communicating of financial inform|
|A book keeper is not liable for accountancy work||An Accountant is liable for the work of book keeper|
|Special Knowledge and ability is not required for book keeping||It requires special knowledge and ability|
|It is the first stage of accounting||It is the second stage of accounting|
|It is Prepared by Juniorstaff||It is Prepared by senior staff|
Accounting Principles are the body of doctrines commonly associated with the theory and procedure of accounting. They serve as an explanation of current practices and as guide for the selection of procedures where alternatives exist. It is a general law or rules adopted as a guide to achieve. It is a basis conduct or practice . Accounting principles are really speaking the rules which are based on the traditions, usages and all accounting principle are based on them. It is also Termed as ground rules that govern accounting.
The fundamental of principles and concepts of accounting are termed as Generally Accepted Accounting principles (GAAP). Accounting principles must be objectivity applicable usable and simple. They are accepted by professionals accountants, courts governments, business executives,management,accountants and tax authority. etc so theyare generally accepted accounting principle. Institute of certified public Accounts (AICPA) and institute of chartered Accountancy of india(ICAI) are main bodies related with developing the various accounting principles.
1.Accounting period concept:
Every Businessman wants to know the Result of his own investment and efforts after a certain period. Usually one year period is regarded as an ideal for this purpose. It may be 6 months or 3 months or 2 years also. This period is called accounting period. It Depends on the nature of business and object of the proprietor of business. Accounting period is mostly one year. To know the income and financial position, every business must define its know the income and financial position, every business must define its accounting period may be either calendar year or other.
Dual Aspect concept:
Every transaction affects two accounts. This is why double entry system of book keeping came into existence. All the business transactions are recorded on the basis of this concept. It is the foundation on which whole of book keeping and accountancy is based.
Business entity concept:
Business is treated separate from the proprietor. All the transactions are recorded in the books of the business and not in the books the proprietor is also treated as a creditor for the business and not in the books the proprietor. The Proprietor is also treated as a creditor for the business. when he contributes capital, he treated as a person who has invested his amount in the business. His personal transactions are excluded from business transactions.
Important Questions for exam Account
- Giving the meaning of book-keeping in your own words?
- Write any three objectives of book keeping system?
- Mention Any three functinons of book keeping ?
- Explain in brief the meaning of Accounting?
- Briefly Explain any four objectives of accounting ?
- State any four functions of Accounting ?
- What is the Difference between book-keeping and accounting?
- Write in Brief The essential of maintaining books of account in business ?
- Briefly explain about the scope of accounting?
- Explain about Generally Accepted Accounting Principles (GAAP)
- Explain the “accounting periof concept?
- Define the matching concept?
- Write in Brief About money measurement Concept?
- Book keeping and accounting
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