Page 13 - Book-keeping for Secondary Schools Student’s Book Form One

Introduction to Book-Keeping

Determination of business’s financial
position
Book-keeping helps the owner to
determine the financial position of his or
her enterprise. It enables him or her to
understand the value of assets, liabilities,
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and the amount of capital contributed
by the owner. This can be useful in
establishing whether the business has
grown or not. Knowing the financial
position of a business can also assist in (a)
applying for a loan or other form of credit
for expanding its operations.

Tax assessment
Tax authorities such as the Tanzania
Revenue Authority (TRA) and Zanzibar
Revenue Authority (ZRA) need to receive
and examine the books of accounts of (b)
every enterprise operating in the United
Republic of Tanzania. This is important in Figure 1.1: Logos of key organs responsible
calculating the amount of tax that should for revenue administration in Tanzania
be paid by the enterprises. Tax laws in
Tanzania use self-assessment system, Accounting process or accounting
where for some taxes the taxpayer is cycle
required to make own calculation of
tax payable. Thus, proper keeping of The determination of a profit or a loss,
financial records helps both the owner together with other objectives, is done
and tax authorities to assess the amount through the preparation of financial
of tax payable. Tax laws in Tanzania statements. The entire process that
also penalise businesses that do not businesses undertake to prepare financial
maintain financial documents and records statements from accounting records is
properly. Book-keeping therefore, may known as the accounting cycle. The
help the business save money that would accounting cycle involves eight stages,
otherwise be paid as penalties for not and Book-keeping plays an active role
maintaining financial records. Figure in the first seven. The stages in the
1.1 (a) and (b) shows logos of Tanzania accounting cycle are summarised as
Revenue Authority and Zanzibar Revenue follows:
Authority respectively. (i) Identifying transactions using the

source documents,

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