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Define Book-keeping. What are the difference types of Book-keeping system?


Book-keeping system:
Book keeping is the art of recording monetary transactions in the books of account in a proper manner. It primarily focuses on the recording aspect of the transactions.

1.      Single entry system:

A system in which we do not record both aspects of the transactions i.e. debit and credit. It is normally used by the small businesses who keep the incomplete record of the transactions.

Feature of single entry system:

1.      Oldest system of recording.
2.      Simple and easy.
3.      No professional Knowledge is required.
4.      No definite methods or principles.
5.      Suitable for small business.
6.      No complete record of all transaction
7.      Not acceptable by the audit and tax authorities.
8.      Income or loss is calculated by increase or decrease in assets and liabilities over a period.

2.      Double entry system:

It is a system of accounting in which both debit and credit aspects of the transactions are recorded. This is a true form of accounting where complete information of the accounting records is available.

Features of double entry system:

Ø  Record both aspects of every transaction.
Ø  Trial balance can be drawn to prove accuracy of record.
Ø  Profit and loss account can be prepared to know net result of business.
Ø  Balance Sheet can prepare.

Objectives of Book-keeping:

Ø  It must provide a permanent and systematic record of all business transaction.
Ø  The periodical results as to profits or loss should be readily and accurately ascertainable.
Ø  To enable financial data to be supplied for management of the business.

Ø  To ascertain the combined effect of all the transaction made during an accounting period upon the financial position of the business.

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