Accounting involves recording, classifying, and summarizing financial transactions and events. It has several objectives, including maintaining business records, calculating profit and loss, and ascertaining the financial position of a business. The key features of accounting are identifying transactions, measuring them, recording, classifying, summarizing, analyzing, and communicating information. Accounting provides quantitative information to various users and helps facilitate management decision making, though it also has some limitations like only recording monetary transactions.
Accounting involves recording, classifying, and summarizing financial transactions and events. It has several objectives, including maintaining business records, calculating profit and loss, and ascertaining the financial position of a business. The key features of accounting are identifying transactions, measuring them, recording, classifying, summarizing, analyzing, and communicating information. Accounting provides quantitative information to various users and helps facilitate management decision making, though it also has some limitations like only recording monetary transactions.
Accounting involves recording, classifying, and summarizing financial transactions and events. It has several objectives, including maintaining business records, calculating profit and loss, and ascertaining the financial position of a business. The key features of accounting are identifying transactions, measuring them, recording, classifying, summarizing, analyzing, and communicating information. Accounting provides quantitative information to various users and helps facilitate management decision making, though it also has some limitations like only recording monetary transactions.
Accounting involves recording, classifying, and summarizing financial transactions and events. It has several objectives, including maintaining business records, calculating profit and loss, and ascertaining the financial position of a business. The key features of accounting are identifying transactions, measuring them, recording, classifying, summarizing, analyzing, and communicating information. Accounting provides quantitative information to various users and helps facilitate management decision making, though it also has some limitations like only recording monetary transactions.
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CH-1 INTRODUCTION TO ACCOUNTING
Meaning of accounting:
According to American Institute of Certified Public Accountants (AICPA) 1941
“ accounting is the art of recording , classifying, summarising in a significant manner and in terms of money, transaction and events which are, part at least of a financial character , and interpreting the result there of”.
Features of Accounting
1. Identification of financial transactions and events.
2. Measuring the identified transactions. 3. Recording. 4. Classifying. 5. Summarizing. 6. Analyzing and interpretation. 7. Communicationg.
Objectives of accounting
1- To maintain records of business.
It is very difficult to remember all the business transaction that take place. Accounting serves this purpose of record keeping by recording all the business transactions in the books of account. 2- Calculation of profit and loss. Accounting helps in ascertaining business result i.e., profit earned or loss suffered in business during a particular period. This is done through the preparation of profit and loss account or an income and expenditure account.
3. Ascertain the financial position of the business.
The business man is always interested in knowing his financial position
i.e., where he stands, what he owes, and what he owns. That means the position of asset and liabilities. This objective is served by the
balance sheet or position statement.
4. Providing information to users.
The accounting information obtained from records should be communicated to interested parties in the form of reports, statements, graphs charts etc. 5. Protecting business assets. Accounting maintains record of assets owned by business by the business which enables the management to exercise control and protect them. 6. Facilitating management. The management often requires financial information for decision making , effective control budgeting and forecasting.
Advantages of accounting 1- Provide quantitative information Accounting helps in providing quantitative information on profit earned and loss suffered by the business 2- Helps in ascertaining the financial position of the business Accounting helps the business to know the financial position that is total asset and liabilities. 3- Systematic recording of data is possible Accounting helps in making a systematic record of transaction which can be used for future reference. 4- Act as an information system It provides necessary information to the interested users. 5- Beneficial to different users. Limitations of accounting 1- It records only transactions which can be recorded in monetary terms. Qualitative aspects like managerial skill, service of experts etc. are not considered. 2- Accounting is a post mortem survey because it records events as they have taken place. From decision making point of view information is needed not only of past but also about the present and the future. 3- Effects of price level changes are not considered. Accounting records show only actual cost. The real value may vary from time to time. Thus the recorded cost cannot provide correct information. 4- Accounting ignores qualitative information 5- Accounting is not fully exact. 6- Accounting ignores the qualitative elements. 7- It may lead to window dressing.
"The Language of Business: How Accounting Tells Your Story" "A Comprehensive Guide to Understanding, Interpreting, and Leveraging Financial Statements for Personal and Professional Success"
