Definition and objectives of BookkeepingAccounting is defined as "the art of recording,
classifying and summarising in terms of money transactions and events of
financial character and interpreting the results thereof." In simplest words, we
can say :
(0) Accounting is an art...
(b) of recording classifying and
summarizing...
(c) in terms of
money...
(d) transactions and events of
financial nature and
(e) interpreting the results
thereof.
Accounting is an art of correctly
recording the day to day business transactions: It is a science of keeping the
business records in a regular and most systematic manner so as to know the
business results with minimum trouble. Therefore, it is said to be a statistical
procedure for the collection, classification and summarization of financial
information.
Objectives of AccountingThe objectives of accounting are
two-fold :
(i) To record permanently, all
business transactions, and
(ii) To show the effect of each
transaction and also the combined effect of all such transactions for a given
period so as to find out the profit the business has earned or loss incurred,
and also to know the correct financial position on a particular
date.
The necessity and importance of
accounting can be understood by answering the following questions :
(i) How much we have earned this
year ?
(ii) How much was earned during the
last year ?
(iii) Is our business
improving?
(iv) How much cash do we have?
(v) How much money we owe?
(vi) How much others owe to us ?
These questions are of decisive
importance for a trader and the answers can only be derived from up to-date
financial records. Only the system of keeping the perfect records of all
business transactions will help the proprietor to know the amount he has gained
or lost.
The main objective of any business
is to earn maximum possible profits with minimum expense. In view of this, a
commercial organization always tries to expand its business, increase its sales
and reduce operating expenses. The progress made in this regard, is always
indicated only by the properly maintained financial records.
Meaning of AccountingIn the beginning, the main
objective of accounting was to ascertain the result of the business activities
(whether profit has been earned or loss has been suffered) during a year and to
show the financial position of the business as on a particular date. Accounting
has to meet the requirements of taxation authorities; investors, government
regulations; management and owners. This has resulted in widening the scope of
accounting and may be defined as follows:
"Accounting is the art of
recording, classifying and summarizing, in a significant manner and in terms of
money transactions and events which are in part at least, of a financial
character and interpreting the result thereof."
Is Accounting a Science or an Art ?In simple words, science
establishes relationship of cause and effect whereas the art is the application
of knowledge comprising of some accepted theories, principles and rules. Since
accounting docs not establish cause and effect relationship it only provides us
with the procedure by which objectives of accounting can be achieved, therefore
accounting is an art and not a science. Accounting is an art of recording
financial transactions in a set of books; classifying in desired categories and
summarizing the information for presentation in a suitable manner to the
concerned persons for their benefit.
Scope of Accounting The need of a system of accounting was felt by man early in the history of trade and commerce. The art of book-keeping is as old as the art of trading itself. This art of keeping records passed through many phases since its inception. With the development of commerce, it has attained a position of great importance. Indeed, it can be truly said that accounting has become the foundation on which the whole fabric of modem commerce rests. Though there is no legal obligation on an ordinary trader to keep the records, every business house finds it essential and convenient to keep the systematic records so as to know where exactly it stands. Moreover, it is legally binding on some forms of business, such as joint stock companies, to prepare periodically, statements in proper forms showing the position of the business. A proper and satisfactory method of accounting is an essential part of any business house for the following reasons : (i) If no records are kept, it will be difficult to find out accurate net profit. Under such circumstances, tax authorities may overestimate the profits and thus a trader will suffer for not having kept the business records. (ii) In absence of proper business records, the trader will find it difficult to submit the true position to the court in case he becomes insolvent. (iii) Keeping of proper records helps the trader in framing future business plans & policies. (iv) It will be difficult to ascertain and fix the price of business to be sold or disposed off, if no records are kept. (v) Finally, in spite of the best memory it is beyond the capacity of a trader to remember all the business dealings with back references. |
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Note for International VAT USers and GST Users in India
Many business use services of Tax Consultants and Chartered Accountants for filing the Tax Return and the tax return of the software is not used. To assist such activity you can export all reports from the software to MS Excel or MS Word and submit it to your tax adviser for financial figures for the business . The software will perform all Inventory Control, Vouchers, Nominal Ledger Accounts along with Working/Trading and Profit & Loss account that will give you all figures ready for export for filing Tax Return. As soon as you are sure about the changes you want in the visual interface and printing regarding your GST requirements we will modify the software software as per your GST requirements. To get any of the off-the-shelf software modified for visual interface and printing please Contact Us Now. We will carry out all required customization for GST as per your requirements in the existing software in professional and timely manner . For any required customization as per GST in any of the off-the-shelf software, please contact us now. We will carry out required customization for GST as per your requirements in the existing software at nominal additional charges. Give us details of required customization for a man-hour or work estimate. For official reference to GST refer to following links:GST (Goods and Service Tax) Circular by Central Board of Excise and Customs (CBEC), Department of Revenue, Ministry of Finance, Government of India. Finance Act 2016 of Government of India HSN codes for Goods and Service Tax (GST) in India Central Board of Excise and Customs - HSN Codes Circular by CBEC, Government of India - About HSN Codes.
Central Goods and Services Tax (CGST) Rules, 2017 Draft government Approved Format Under Goods and Services Tax - Invoice Rules What is GST Compliant Business? What are the specific mandatory fields in an GST compliant invoice? Why the invoice an important financial instrument? What are Registered and Un-Registered Dealers? There is a lot for your business to catch up on those links along with online tax filing and registration for trading. Give us the details of required work you want in the off-the-shelf VAT accounting system and we shall make it GST compliant invoicing and accounting for your business at nominal additional charges. Cheers. Happy Accounting. If you want to know the details of for making VAT/CST system compliant to GST system: Standard rate of $15 per man hour shall be applicable for making any of off-the-shelf VAT based accounting software systems into CGST/SGST Compliant Accounting. Give the details of customization required in any of our off-the-shelf VAT accounting systems made for various business to get a quote of additional charges. See demo of software on website. See official Indian Government CGST/SGST Specification on the panel above here. Click for more information on Value Added Tax (VAT). Free Download of Full Featured Software - Try Full Featured Software Before Order - Time Limited 30 days Full Featured Version of these software are available for download from our website www.freeaccounting.in. HiTech Billing, Accounting Software Off-the-Shelf versions are available for Business, Traders, Industry, Hospital, Hotel, Petrol Pump, Medical Store & Distributor, Automobile or Motorcycle Dealers, Newspaper or Magazine Publishers, VAT Accounting & Billing and Commodity Brokers. | ||||||
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