NEED FOR ACCOUNTING
Business is one of the sources of earning income. Whenever a business is started, it requires investment of certain amount which is called as capital. With this amount of capital the businessman may deal either with trading business or manufacturing business. In a trading business, he will buy goods at a lesser price and sells the same to others at a higher price. In case of manufacturing business, he has to buy raw materials and incur other expenses in the form of wages and salaries, rent, power, insurance, tax, transport, postal and telephone expenses and so on, in the course of production and distribution of goods. In a small sized business the transactions are simple and less in number. But in a large sized business the transactions are numerous. These business transactions enable the businessman to know the result of his business which can be profit or loss for a given period of time. In order to know the result of his business, a businessman has to remember all the transactions of his business. However, owing to lack of memory it is not possible for anybody to remember all the transactions over a period of time. This has given rise to maintenance of a set of accounting books in which business transactions are chronologically recorded. The systematic recording of business transactions enable the businessman to account for every transaction without missing any item. Such a system of maintenance of a set of accounting books to record business transactions is known as book keeping system.
ORIGIN OF BOOK KEEPING
The practice of record keeping existed ages before the formal recording of history. Barbarians began to keep records by scratching them on rocks. From there crude forms of picture writing, the process of rudimentary bookkeeping began. The Italians were the leading bookkeepers and record makers for centuries. As early as 813 A.D., Bookkeepers were recognised in Italy and from these men came many of the fundamentals of the modern double entry bookkeeping. In 1911, a Florentine banker devised the first complete bookkeeping system as distinguished from the simple devices previously used. It had all the rudiments of a set of books including a rough plan of cross entries. The first known system of complete double entry was discovered in Genoa in 1340.
Advanced Accounting The first text book on bookkeeping was written in 1414 by Pacioli, a monk of the order of St. Francis at Venice. Many present day methods were described by this old world mathematician and the ideas he expressed have lived to the present day. Paciolis treatise is based on the premise that where one wishes to conduct his business properly, he must first have sufficient cash or credit. Secondly, he must be a good bookkeeper. Thirdly, he must possess a proper book keeping system. The years following Paciolis treatise were marked by the refinement of the double entry bookkeeping system and by the use of the position of the accountant in the commercial world. Publications were released and some accountants association were formed, but it was not until the 19th century that accounting really became a profession. It was not until the dawn of the 20th Century that the invention and perfection of the business machines of today took the business of record keeping from the Shadow of the Pen. A new conception of accounting valuation began to take form and the bookkeeper really became on Accountant. The keeping of books was no longer restricted to the preparation of financial statement. Because of the ease with which facts could be recorded, accumulated and analysed, the accountant began to devote his time to the interpretation of booked facts and as a result, became a member of managements team.
MEANING AND DEFINITION OF BOOK KEEPING
The art of recording business transactions in a systematic manner is termed as bookkeeping. It is the name given to a system which is concerned with recording...
Please join StudyMode to read the full document