What is the Purpose of Bookkeeping?

One of the most frequently asked questions about bookkeeping basics is, “What is the purpose of bookkeeping?” If you’re new to business, you may already have a million other things to worry about. Brushing up on your bookkeeping skills may seem like a task for another day. However, there are innumerable benefits to keeping accurate documentation and monitoring your spending and income.

Bookkeeping has two primary objectives:

1. To accurately document all financial transactions that result from business activities using best practices.

2. To determine and analyze the financial outcomes of business activities.

To adequately log all business-related financial transactions, bookkeepers typically require a robust catalog of all transactions and associated costs. They may group transactions into categories like good or service, wage, tax, or another general business operation.

When it’s finally time to audit all reported financial transactions, bookkeepers produce reports that give an accurate look into how the company delegated its capital. The two key reports that bookkeepers provide are the balance sheet and the income statement. Both reports should be easy to comprehend so that all readers can grasp how well the business is doing.