Explain the role of Book-keeping

Objectives/roles of bookkeeping

1. Determination of profit:

   The main aim of any business is to make profit. It would be very difficult to ascertain whether a business is making profit or loss without the help of complete, accurate and up to date accounting records.

2. Knowledge of credit dealings:

   Since most business, a proprietor will have to maintain proper accounting records in order to know the amounts due from his/her debtors and those owning to his/her creditors.

3. Business control:

   This depend on the profitability level of ones business. By maintaining the movement of his asset and liabilities, the proprietor will be able to detect errors, fraud and misappropriation and thus take corrective measures.

4. Reliable financial position:

   In such a case, the credit worthiness of the business must be proved. Alternatively, a businessman may decide to sell his business where by, the information contained in his/her accounting records will influence the determination of sale price.

5. Fair tax assessment:

   The income tax department will require the submission of proper accounts for scrutiny in order to determine a fair tax charge. Scrutiny means careful and thoroughly examination.