Book-Keeping - Meaning and Objectives | Class 11 | Class 9

What is Book-Keeping?

There are many different definitions of bookkeeping. But in simple words, bookkeeping is the process of recording business transactions in books of accounts in a very systematic manner. Systematic manner means recording the business transactions date wise. So in bookkeeping, you need to maintain a record of all your business transactions datewise.

What are the objectives of bookkeeping?

Book Keeping is required for quite a few reasons. Following are major reasons why Bookkeeping is required -

1. To find profit/loss - The major reason is to find profit or loss your business is making. Unless you keep a proper record of all your business transactions, it is not possible for you to find profit or loss that your business is making.

2. To determine your tax liability - Bookkeeping also helps in determining your tax liability. Your tax amount depends on the amount of profit or loss your business has done. And to determine the amount of your profit or loss bookkeeping is required. So bookkeeping is also required to determine your tax liability.

3. To check the progress of business - Bookkeeping is also required to check the progress of your business. To determine the progress of your business, you need to compare the current year's profit or loss with the previous year's profit or loss. Now, this is not possible unless you maintain a proper record of all your business transactions.

4. To know the amount receivable/payable - Bookkeeping is also required to know what is the amount of you need to pay to someone or you need to receive from someone. In business, you deal with quite a few people and unless you maintain a proper record of all your transactions, it is difficult to find how much money you need to pay or how much money you have to receive from someone.