subject: The Necessity of Bookkeeping Records [print this page] The necessity of an efficient and reliable bookkeeping system was felt very early itself when commerce and trade necessitated a structural form of operation. The very art of safe-keeping the essential records went through many phases as bookkeeping became a common practice. As trade and commerce witnessed step by step development, it attained a position of high magnitude. It can be firmly argued that bookkeeping and accounting have become the solid foundation on which the very fabric of modern day business rests. Each and every business house finds it indispensable as well as convenient to stick to the practice of keeping systematic records. This way, one can know where exactly one stands. What is more, some forms of businesses such as joint stock companies are legally bound to prepare periodical statements in the required format stating the current position of their business. A reliable and satisfactory method of bookkeeping is an essential part of any kind of business, and it has got its reasons also. If companies and organisations keep no records of business transactions, it will be hard to make accurate conclusions and forecast reports. In circumstances like these, tax authorities might not get the accurate figures regarding profits and aspects like that. As a result, the trader would be on the wrong side and will suffer for not having kept proper and accurate records of the financial transactions happening in the business. If proper business bookkeeping records are not in place, the business owner will find it difficult to submit accurate information to the court in case of him becoming insolvent by some or other means. With the regular upkeep of financial records, the trader will be able to frame future business plans, expansions and other related policies. Once the business has become insolvent, it will, in all possibility, be difficult to ascertain the price of business that have to be disposed of, if no proper record keeping system is in place. The objectives of bookkeeping are two-fold. One aim is to keep accurate records of all the financial transactions. Another is to give a lay person an idea about the effect of each transaction and also the synergic impact of all such transactions during a given period. This facilitates in understanding the profit figures and the loss figures. Just by going through the records, one will get to know the exact financial position of the organisation on a particular date. Such kind of information assumes importance when viewed from different angles. The creditors, suppliers of goods and lending organisations that extend temporary advances or long term loans would be interested in the stability factor and earning levels of the borrowing firm. Nevertheless, they will specially look into the Companys short-term solvency potential aspect. Most of the time, it is the government mechanism that regulates and controls the prices of essential goods like drugs, vegetables and oil. So, governments also would be interested to know the figures in costing in order to administer excise duties so as to regulate the prices of different services and products.
