Question

Q. Explain why double-entry bookkeeping is so profoundly important in the world of accounting. (no copy paste please/300-400 words/also quote references)

Answer 1

Book – keeping is that the branch of knowledge which tells us how to keep a record of financial transactions it includes recording of journal, ledger, posting in ledgers and balancing of accounts

All the records before the preparation of trail balance are the whole subject matter of book keeping

Book- Keeping is the science and art of correctly recording in book of account all those business transactions that result in the transfer of money or money’s worth.

Book – keeping provides a permanent record of each transaction

Soundness of firm can be assessed from the records of assets and abilities on a particular date

Entries related to incomes and expenditure of concern facilitate to know the profit and loss for a given period

It enables to prepare a list of customers and suppliers to ascertain the amount to be received or paid

It is a method gives opportunities to review the business policies in the light of the past record

Amendment of business leaves provision of licenses assessment of taxes etc., are based on records

It provides the most vital information to the management for making and preparing budgets

It provides the most effective way to the management for fixing up the objectives of the business

To identify the errors, frauds, mistakes easily to maintaining the book keeping