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UNIT-3

CHAPTER-3

BOOK KEEPING & ACCOUNTANCY

THE MEANING & OBJECTS OF BOOKKEEPING

Book Keeping

• Book Keeping is involved in the recording of transactions
• It is the systematic recording and classification of financial data of an organization in an orderly manner
• It is to show correct position regarding each head of income and expenditure as well as assets and liabilities
• It is essentially a record-keeping function done to assist in the process of accounting
• It is preliminary step of ‘Book of Account’
• It is actually a recording function & the analysis is done during accounting

Objectives of Book Keeping

• To keep a complete and accurate record of all the financial transactions in a systematic orderly, logical manner.
• To ensures that the financial effects of these transactions are reflected in the books of accounts
• To ascertain the overall effect of all recorded transactions on the final statement of the company
• To measure all financial transactions in monetary value
• To record all financial transactions in the books of prime entry in chronological order
• To record all financial transactions by classifying them as personal, real and nominal account
• To keep all records of financial transactions permanently for future reference
• To summarize the cumulative effect of all economic transactions of business for a given period by maintaining permanent record of each business transaction with its evidence and financial effects on accounting variable………….

The following are the advantages derived from ledger:

• It is the ledger through which successfully application of double entry system of bookkeeping is ensured. Each and every transaction is divided into two parts -receiver and giver- and recorded in the two concerned account in ledger.
• Transactions relating to different persons or concerns are recorded in the account of each person or concern separately .as a result, complete and reliable information is available in respect of each and every accounts.
• Different types of income and expenses are recorded in different accounts separately .so, it is possible to ascertain the amount of income and expenditure under each head and the overall result at the yearend through trading and profit and loss account.
• Separate account is opened for each item of assets and liabilities. it is , therefore, possible to ascertain the value of different assets and liabilities and the true financial position at the yearend through balance sheet.
• Transaction being recorded primarily in journal and therefore finally in the ledger, the possibility of errors and defalcations is remote.

Valuable information and statistics are collected from ledger and supplied………

PETTY CASH BOOK

In every business, of whatever size, there are many small cash payments such as conveyance, carriage, postage, telegram, etc. These expenses are generally repetitive in nature. If all these small payments are recorded in the cash book, it will be difficult for the cashier to maintain the records all by himself. In order to make the task of the cashier easy, these small and recurring expenses are recorded in a separate cash book called “Petty Cash Book” and the person who maintains the petty cash is called the “Petty Cashier”. Petty means “small”. The petty cash book is a book where small recurring payments like carriage, cartage, postage and telegram, printing and stationary etc., are recorded by the petty cashier, a person other than the main cashier.

IMPREST SYSTEM

Imprest means ‘money advanced on loan’. Under this system the amount required to meet out various petty expenses is estimated and given to the petty cashier at the beginning of the specified period, usually a month. All the payments are supported by vouchers. At the end of the given period or earlier, when the petty cashier has spent the petty cash amount, he closes the petty cash book for the period and balances it. Then he submits the accounts to the cashier. He verifies the petty cash book with the vouchers .After satisfying himself as the correctness and genuineness of the payments an amount equal to the cash spent is given to the petty cashier. This amount together with the unspent amount will bring up the cash in hand to the amount with which he originally started i.e., the imprest amount. Thus the system of reimbursing . ……………………….READ MORE

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