The importance of Book-keeping are as follows:
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Limitation of human memory:
Capacity of human beings is limited as to how much one can remember and that too for how long? Proper according records do away with the need of remembering.
ADVERTISEMENTS:
Owners and managers being different persons:
Written records supported by documentary evidence are essential to avoid any mistrust or doubt among owners and managers.
Preparation of financial statements:
Business wants to know the profit earned or loss suffered during the year and its financial position at the end of the year. This is disclosed by income statement (Trading and Profit and Loss Account) and position statement (Balance Sheet) respectively. Book-keeping records provide necessary data for preparing these statements.
ADVERTISEMENTS:
Need for financial information:
Financial information and data are needed for cost ascertainment, planning, budgeting and forecasting. Records maintained by book-keeping are the source of such information.
Need of taxation authorities:
Book-keeping records are regarded by the tax authorities as authentic and reliable for determining tax liability.