Basic Accounting Notes

Needs And Importance Of Accounting:
We live in a world where people need things from the day ther are born to the day that they die .
Some of then are emotional wants a need for education entertainment , or recreation .
Some of thede needs are physical needs a need fr goods of barious sorts . food , clothing , shelter , and
so on.jjjj
Some of thenare emotional wants a need for education , entertainment , or recreation .
In satisfying such needs businessmen performuseful services to their fellow humans.
In return they expect to earn a reasonablr reward for their efforts in the form of profits.
cut tour coat according to tour cloth so goes the saying . Even a king becomes apauper, if he
fails to exercise economhy inhis expenditures . In othr words every individual will have to plan his
wzpenditur according to his income. Pbviously the question arises why is this p;anning necessary
theneed for such planning arises as oor wants or desires or needs for gooods and srvices are ylimited
while the meand ,i.e. the income with which to buy such goods and services are limited . Qhere,
however , goods and drvices are available free of cost , i.e. gifts of natur , such as air , qater 9not in
cities) etc. thre is no UESTION OF economy. But the necessity of economy is undeniable wher goods or
servicesare not available free of cost and their supply I limited. Aproper andfair planningof expenditure
s help s us to endure proper ude of our income . of course it is true that the quantity if goods or money
cannot be increase by makig aproper planning. But certainly we can endur most wconomic use of goods
or money at oyr disposal. Most of us do maintain some kind of awritten record of our income and
expenditure .The idea behind maintaining such record is to know thecorrect position regarding income
and expenditure .The need for keeping a record fo income and expenditure in a clear and systematic
manner has given rise to the subject of book keeping.Some individuals donot recgnise the necessity of
keeping account of their day to day expenditurs , since thehy spend their own income and are not
required to account for it to anybody else but such an idea is wrong, A family , however , small it may be
, must exercise proper control over ots expenditures so as to ensure futre security . family has two fold
responsibilities one is that of ensuring all (round welfare of the family and the other is the social
responsibility . needless to sy , money is the most essntioalpre request for ensuring peace and
happiness of a family , which each and every member desires. The quantu of mney must be adequate in
relation to the needs .But mere asequacy of money will not do one has to take care of ots proper
ultilization.For this it would b necessary toexercise exonomy and maintain proper books of account , on
the other hand each and every family myst save a portion of its imcome for future contingencies. It is
possible to increase the amount of saving through proper management and effective control of the
family expenses . Through such saving the family helps materializing the economic [lanning of the
country.It is all themore necessary for an organization or a concern to keep proper accounts. At the end
of the year the true result of the economic activities of aconcern must bbbe made available otherwise it
will not be possible to run the concern . in case of abusiness concern the profit or loss at the end of
ayear mustbe ascertained , because , thje amount of profit must be adequate in relation to that of
investment made in the business . If it is not so or if there is a loss , ot is an indication of some defects
existing somewhere in the management of the business . All such defects need to be detected and
analysed and appropriate measures taken for thir rectification. But it is only possible , if proper books if
accounts are maintained in the business concern. So , the omportance of book keeping to to a business
is the same as that of fresh air to a man to exist , without book keeping records a business would meet
death, though not instantly, but in short time .
Moreover , if proper books of accounts are not kept in a business , the amount of profit cannot be
ascertained and it will not be possible to distribute the profit among the owners of the business , The
income of tax dues to the Government cannot also be paid . In dthe absence of books of accounts
misuse or defalcation of money will remain undetected . The owner

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Needs And Importance Of Accounting:

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