Importance and utility of Book keeping -

Though book keeping is not made compulsory in respect of all types of business by statute, the maintenance of book accounts is essential in respect of every business for the following reasons.

1) In the absence of book-keeping nobody can carry out the business successfully. He will not be in position to know where he stands. He cannot know whether his business is profitable or unprofitable . He cannot ascertain the total amount of his capital and how it made up.

2) Book keeping enables the executives of the business to control the activities of the business . The executives of the business arrive of certain conclusions by reading the accounts of business i.e. a sale manager can ascertain whether a particular customer is a regular purchaser, prom in payment, worthy of extending credit facility etc. by reading the account of that costumer.

3) For the correct assessment of income-tax , sales-tax, custom duty etc. The book of account are required to be maintained and produced as an evidence in the respective departments of the government.

4) The business are required very often to take loans from bank or other financial institutions. In order to ascertain credit worthiness of the applicants , the lender require to go through the account of the applicants .After having studied the accounts carefully the lenders take a decision in respect of granting loans, cash credit etc.

5) If a legal action is required to be taken against any customer, for recovery of debt due from him , the book of accounts are required to be produced in the court as an evidence.

6) In case of Insolvency the court may refuse or suspend the discharge of an insolvent who can not produce book of accounts.

7) For ascertaining the value of the business in case of admission of a partner or amalgamation or sale of business, the book of accounts are required to be investigated.

8) Maintenance of books of accounts has been made compulsory in respect of companies by the companies Act, to safeguard the interest of the parties who have financial stake in the company.

9) In support of insurance claim lodged with the insurance company the relevant account are required to insurance company.

10) Even the government is required to publish the account the accounts of the last year at the time of placing the budget before the house for discussion and approval.