When a person starts a business, whether large or small,his main objective to earn profit.To carry on business activities, he has to have Office,computers,machinery,staff,electricity,telephone,vehicle
and some other necessary things(so on..).To make available all these things either he has to invest money from his own pocket or has to take loan from bank or from relatives.
Ok..so first he will bring money into business,will open bank a/c of business and deposit money into this bank a/c.He will purchase or take on rent office,buy computers,hire staff,take telephone line,
machinery if required depend on nature of his business. For example, he starts a business of manufacturing of children's toys, he needs toy manufacturing machine, if he starts printing business, he has to purchase priting machinery.after making all necessary things available,he will start production and sell his product in market to receive income.
In short, he will receive money from Selling goods,providing service, interest on bank fixed deposits etc.same time, he has to spend money on certain items like production or purchasing or goods,salary to staff, office rent, electricilty and telephone bill etc.His income should be more than his expenses to earn profit.To know the profit earned in specific period of time,he has to keep record of each and every business transaction.It is not possible to any businessman to memorise as to how the money had been earned and spent at month end or year end to calculate profit.at the same time,if he noted down his income and expenditures,he can readily get required information.Hence,the details of business transactions have to be recorded in a clear and systematic manner to get answers easily
and accurately for the following questions at any time :
1 income earned
2 amount spent
3 amount to be payble to supliers
4 amount to be receive from customers
5 profit earned or loss incurred
6 cash in hand
7 cash at bank
8 closing stock
and some other necessary things(so on..).To make available all these things either he has to invest money from his own pocket or has to take loan from bank or from relatives.
Ok..so first he will bring money into business,will open bank a/c of business and deposit money into this bank a/c.He will purchase or take on rent office,buy computers,hire staff,take telephone line,
machinery if required depend on nature of his business. For example, he starts a business of manufacturing of children's toys, he needs toy manufacturing machine, if he starts printing business, he has to purchase priting machinery.after making all necessary things available,he will start production and sell his product in market to receive income.
In short, he will receive money from Selling goods,providing service, interest on bank fixed deposits etc.same time, he has to spend money on certain items like production or purchasing or goods,salary to staff, office rent, electricilty and telephone bill etc.His income should be more than his expenses to earn profit.To know the profit earned in specific period of time,he has to keep record of each and every business transaction.It is not possible to any businessman to memorise as to how the money had been earned and spent at month end or year end to calculate profit.at the same time,if he noted down his income and expenditures,he can readily get required information.Hence,the details of business transactions have to be recorded in a clear and systematic manner to get answers easily
and accurately for the following questions at any time :
1 income earned
2 amount spent
3 amount to be payble to supliers
4 amount to be receive from customers
5 profit earned or loss incurred
6 cash in hand
7 cash at bank
8 closing stock