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Objectives of Bookkeeping and Accounting

>> September 30, 2009

1. Show Permanent Record of Business 

The main objective of bookkeeping and accounting is to keep complete record of business transactions on the basis of accounting rules and regulations. It will be helpful to reduce the errors. For permanent record of business, we first record all transactions in our journal and then we transfer it to ledger through posting

2. To Know Profit or Loss of Business 

The 2nd main objective of bookkeeping and accounting is to know the profit or loss of business. For this, we make the trading and profit and loss account of the business. We show all the incomes and expenses in it. If our total revenues will more than our total expenses, we will get net profit. In the case, the expenditure will more than our revenue, we will get net loss. 

3. To Know the Financial Position of Business

For an entrepreneur, merely ascertaining profit or loss of the business is not sufficient. The entrepreneur must also know the financial health of the business. For this aim, after preparing the profit and loss account, a statement called balance sheet is prepared which shows the assets and their value on the one hand and the liabilities and capital on the other hand. A balance sheet is actually a screen picture of the financial position of the business. 

Except above 3 main objectives of bookkeeping, following are also general objectives of it. 

  • Providing the information of total sale and purchase of business.
  • Supplies the information of creditors and debtors of business.
  • Get knowledge of quantity and Value of stock .
  • To determine the amount of Tax liabilities ( both income tax and sale tax )
  • To provide the information to interested parties like owner of business/ shareholders , managers , creditors , debtors , employees , Govt. etc.

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