Bookkeeping is just a part of the accounting process that handles the recording of transactions.
Bookkeeping is an activity related to the systematic recording and classification of an organization’s financial data. This essentially a records management feature which assist in accounting. This is an important factor in preparing your organization’s financial statements at the end of the fiscal year.
It is also related to the classification of financial transactions and events. Classification of such transactions is essential for maintaining proper financial accounting. It also includes the preparation of source documents for ongoing financial transactions and other business operations.
There are many ways of it. The most common are double-entry bookkeeping and single-entry bookkeeping. But even these other methods, including the process of recording financial transactions in some way, are acceptable bookkeeping systems or processes.
Purpose
To maintain an entire and accurate record of all financial transactions during a systematic and logical manner. This ensures that the financial impact of these transactions is reflected in the books.
Second, the main objective is to see the overall impact of every recorded transaction on the company’s final statement. Bookkeeping ultimately checks the company’s final accounts: the profit and loss account and the Balance sheet.
Need for Bookkeeping
One of the main reasons for bookkeeping is to be able to keep records to show the financial status of all heads / accounts of income and expenses.
Through bookkeeping, we can instantly obtain detailed information on each expense and income.
For example, suppose a company sells in both cash and credit. Each of these sales transactions records , when a credit sale takes place, the creditor’s account is seen. Therefore, company management can always look at records / accounts to determine which creditors are borrowing how much money.
Also, maintaining books and financial statements is often a legal requirement. In the case of companies, banks and insurance companies, there are acts that require such companies to maintain and maintain financial records. In such cases, bookkeeping requires and becomes important.
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