Introduction To Accounting
Meaning : Accounting is the process of collecting , recording , classifying , summarising and communicating financial information to the users.
Attributes (Characteristics) Of Accounting
The definitions of accounting bring to light the following attributes of accounting :
Identification Of Financial Transactions And Events : Accounting records only those transaction and event which are of financial nature. For example purchase of raw material for sale of finished goods by a firm. These transactions are identified with the help of Bills and receipts as evidence of the transactions.
Measuring the Identified Transactions : Financial transactions and events are measured in terms of money. For example, purchase of goods say 10 tonnes of steel for Rs. 2,50,000 and 1000 bags of cement for rupees 2,25,000 is measured in terms of money.
Recording : Recording is an art of recording business transaction in the books of account. these books are divided into cash book, purchase book, Sales book, etc.
Classifying : Accounting is an art of classifying business transactions. Classification is the process of collecting similar transactions at one place by opening account in the ledger book. For example in Rahul's account in the Ledger, all business transactions connected with Rahul are posted into this account. So that what is ultimately due to Rahul or due from Rahul can be ascertained.
Summarising : Accounting is an art of summarising financial transactions in a manner which is understandable. This process leads to the presentation of the following statements : (1) Trail Balance, (2) Trading and Profit and Loss account, and (3) Balance sheet.
Analysis And Interpretation : Financial data is analysed and interpreted so that the users of financial data can make a meaningful judgment of the financial position of the business. analysis helps in planning for the future in a better way.
Communicating : Finally, accounting function involves communicating the financial data to its users. The accounting information must be provided in time and presented to the users so that decisions are taken at the appropriate time.
ACCOUNTING PROCESS
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