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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 a chronological order as and when they take place with a view to preparing further statements. This note has information about book-keeping, its objectives, functions and importance.

Book-keeping is an act of recording the financial transaction of a business in a systematic manner. An owner cannot keep all the memory of the financial transactions that take place in the business for the whole year. Therefore, all those financial transaction must be recorded in the books which can be used for future. So, the book-keeping keeps the records of financial transaction of the business for future purpose in a systematic manner.

The following are some of the main definitions of book-keeping:

"Book- keeping is the art of recording business dealings in a set of books." - J. R. Batliboi

"Book- keeping is the art of recording transactions in a systematic manner." – Rosenkamp

"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 worth." - R.N. Carter

Objectives of Book-Keeping

The following are the objectives of book-keeping:

  1. To identify financial transactions
    A business performs many financial and non-financial transactions. The book-keeping helps to identify the financial transactions from all the business transactions for recording them.

  2. To keep systematic records
    The identified financial transactions are recorded by the book-keeping in the prime entry. It keeps the permanent record of the transaction systematically whenever it occurs.

  3. To classify the transactions
    Book-keeping keeps the record of transaction. It classifies the financial transaction into three types- personal, real and nominal. It keeps the record of the classified financial transaction in a permanent book.


  4. To find out operational result of the business
    Every organization is established with the objective of achieving a goal. So, the book-keeping helps to find out the operational result of the business.

Functions of Book-Keeping


The following are the functions of book-keeping:

  • Book-keeping keeps the systematic records of the identified transactions that can be expressed in monetary value.
  • Book-keeping determining profit and loss of the organization by keeping the permanent record of the transactions.
  • Book-keeping classifies financial transactions into different accounts such as personal account, real account, and nominal account.
  • Book-keeping helps to determine the financial position of the business.

Importance or Advantages of Book-Keeping

  1. Provides financial information
    Book-keeping records all the financial transactions that can be used as information whenever required. It provides the information for cost determination, planning, budgeting, and forecasting. This information helps ta make future plans and policies of the organization.


  2. Helpful in ascertaining profit or loss

    Book-keeping keeps the permanent records of the financial transaction due to this it helps to ascertain the profit and loss of the organization.

  3. Knowledge of financial position
    To know the financial position, the financial transaction of the organization should be analyzed. Hence, the book-keeping records the financial transactions and helps to know the financial position of the business.

  4. Helpful in detection and prevention of errors and frauds
    Book-keeping keeps the permanent recordsof all financial transactions in a scientific and systematic manner. This enables to detect errors and frauds that took place in the business. It also helps to take steps to prevent them. It also find measure to prevent the errors and frauds.


  5. Helpful in determining tax burden
    An organization needs to pay different tax such as value added tax, income tax etc. to the government. Book-keeping helps to determine such tax burden easily.
Things to remember
  • Book-keeping identifies the transactions of financial character and keeps the records systematically.
  • The main aim of establishing the business organization is to earn profit. So the important function of book-keeping is to find out the result (profit or loss) of the business.
  • Book-keeping keeps a permanent record of all the financial transactions of a business for future reference.
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
Videos for Book-Keeping
Introduction to Book-keeping
Introduction to Book-keeping
Questions and Answers

Book-keeping is defined as the act of keeping written records of the financial transactions of a business.

Any two objectives of book-keeping are:

  1. To identify financial transactions
  2. To keep systematic records

Any two functions of book-keeping are:

  • Book-keeping identifies the transactions which can be expressed in monetary value for the purpose of keeping systematic records.
  • Book-keeping helps in ascertaining the net profit/ loss and depicting the financial position of the business.

Any two importance of book-keeping are as follows:

  1. Helpful on prevention and detection of frauds and errors
  2. Helpful in ascertaining true financial position of the business

The following are the advantages of book-keeping:

  1. Helpful in ascertaining profit or loss
    Book-keeping keeps complete records of business transactions. Thus, profit or loss from business transactions can be easily ascertained.

  2. Knowledge of financial position
    With the help of recorded financial transactions under book-keeping, a true financial position of a business concern can be known at any time.

  3. Helpful in determining tax burden
    A business concern is required to pay value added tax, income tax etc., to the government. Such tax burden can be easily determined with the help of book-keeping records.

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