The main function of bookkeeping can be summarized as follows:

  1. Recording Financial Transactions: Bookkeeping involves systematically recording all financial transactions of a business, including sales, purchases, receipts, and payments.
  2. Organizing Financial Data: Bookkeeping helps organize financial data in a structured manner, making it easier to analyze and interpret for decision-making purposes.
  3. Tracking Income and Expenses: By maintaining accurate records of income and expenses, bookkeeping enables businesses to track their financial performance over time.
  4. Facilitating Budgeting and Planning: Bookkeeping provides the necessary financial information for creating budgets and making future business plans.
  5. Ensuring Compliance: Proper bookkeeping ensures compliance with tax laws and regulatory requirements by accurately documenting financial transactions.
  6. Assisting in Financial Reporting: Bookkeeping forms the basis for preparing financial statements such as the balance sheet, income statement, and cash flow statement, which are essential for assessing the financial health of a business.
  7. Supporting Audits and Reviews: Well-maintained books make audits and financial reviews smoother processes, as they provide a clear trail of financial transactions.
  8. Aiding in Decision Making: Bookkeeping provides valuable insights into the financial health of a business, helping stakeholders make informed decisions about investments, expansions, or cost-cutting measures.