Accounting

Accounting is the process of identifying, measuring, recording, and communicating economic transactions. In modern times, Accounting is the art of recording, classifying, and summarising financial data (and economic events) and analyzing and interpreting the results thereof for making economic decisions. The process of accounting begins where bookkeeping ends.

Accounting discipline is concerned with recording, classifying and analysing transactions and events which are primarily of financial character. Its function is to provide quantitative information about economic activities that is intended to be useful in making decisions. Accounting is often called as the language of business. 

The basic function of any language is to serve as a means of communication. Accounting also serves this function. It communication the result of business, such as, proprietor, creditore, investore, financial institutions, Government and other agencies. Though accounting is generally associated with business, non-trading organisations like schools, colleges, hospitals, clubs, political parties, charitable trust, Government, house wives and other individuals also make use of it. In other words, where money involved, accounting is required to account for it. In fact, accounting can be thought of as a discipline having universal applicability. However, its growth is closely associated with development of trade, industry and commerce. 

Accounting has been defined in different ways by different authors, experts and authorities. The concept of accounting is changing with the passage of time.

According to R.N Anthony, "Accounting System is a means of collecting, summarising, analysing and reporting in monetary term the information of business.

According to Bierman and Derbim, "Accounting may be define as identifying, measuring, recording and communicating financial information."

So on the basis of above definition we can able to define Accounting as "The process of identifying, measuring, recording, and communicating the required information relating to the economic events of an organisation to the interested users of such information."


NEED OF ACCOUNTING

All businessmen want to know that what profit has been earned or loss has been occurred in business, what is amount of capital as at the end of the year, what they owe to others and what they are to take. Accounting is needed for obtaining these informations.


OBJECTIVES OF ACCOUNTING 

The main objective of Accounting is to ascertain net results and financial position of the business and communicate them to interested perties. Following are the main objective of Accounting:-

1. To ascertain Profit or Loss: To calculate profit earned or losses suffered in business during a particular period, Profit & Loss Account or Income Statement is prepared.

ADVANTAGES OF ACCOUNTING

The following are the advantages of accounting :

1. Accounting helps in ascertaining the profit and Financial Position: Accounting facilitates the preparation of financial statements e.g., profit and Loss Account and Balance Sheet.

2. Accounting provides Systematic Records of Business transaction: A businessman cannot remember all the transaction of the business howsoever sharp his memory may be, Therefore, every transaction should be recorded in black and white so that there may not be an misappropriation.

3. Accounting assists in Managing the Business : Accounting helps the management in managing the business. To manage an enterprise means planing, controlling and decision-making. Accounting records and reports helps the management to discharge its functions.

4. Accounting ensures proof in the court of Law : If the accounts of business are kept properly according to the principles of accounting, they can be presented in the court of law for giving necessary documentary evidence.

5. Accounting Facilitates Correct Payment of Taxes : Accounting helps in ascertaining the tax liability of the business correctly. Taxation authorities insist that accounts are to be maintained according to principles of accounting.

6. Accounting Facilitates Comparative Study : Accounting facilitates inter-firm and intra-firm comparison to detect the strong and weak point of the business. For examples, current year's profit, sales, expenses etc may be compared with those of the previous year (or years).