Bookkeeping is the process of recording financial transactions of a business in an accounting system leading to creation of reports.
The process of sorting and recording financial transactions is known as accounting. Business entities must submit their books of accounts to the Income Tax (IT) Department. Many micro or small companies not having complete accounting departments require external book keeping services putting together their accounts when they have to raise funding or being acquired. However, maintaining the books in-house certainly is a tedious and possibly expensive affair, but getting it done would significantly reduce pains in complying with the requirements of the IT Department, give the promoters and shareholders a good sense of how the business is doing, prove eligibility for loans in later years, and even satisfy investors.
1. It is a statutory Requirement for all business entities except for sole proprietorship.
2. Helps in reviewing the performance taking steps to improve.
3. Maintaining books of accounts aids funding from investors when in need.