What
Is Accounting?
Accounting is the
process of recording financial transactions pertaining to a business. The
accounting process includes summarizing, analyzing, and reporting these
transactions to oversight agencies, regulators, and tax collection entities.
The financial statements used in accounting are a concise summary of financial
transactions over an accounting period, summarizing a company's operations,
financial position, and cash flows.
Definition of Accounting
According to the 'AICPACT', "Accounting is the art of recording, classifying and
summarizing in a significant manner and in terms of money transaction and
events which are in part at least of a financial character and interpreting the
result thereof."
According to Smith and Washburn, "Accounting the process of identifying, measuring and communicating
economic information to permit informed judgement and decisions by users of
the information."
Basic features of Accounting
Ø
Recording of Transactions and Events
Ø
Transaction and Events in term of Money
Ø
Classification
Ø
Summarizing
Ø
Interpretation from results
Objectives of Accounting
Ø To know the financial condition of firm
Ø To provide information to management for managerial decisions
Ø To provide information to interested parties
Ø To determine taxable income of firm
Accounting Principles
Accounting Principles may be defined as those rules of
conduct or procedure which are adopted by the accountants universally , while
recording the accounting transaction. The accounting principles can be classified
into two types:-
(A) Accounting concepts and
(B) Accounting conventions
(A) Accounting Concepts
Accounting concepts means Accounting concepts can be defined as something which signifies a generalization regarding accounting principles. In other word, Accounting concepts means those basis assumptions upon which the science of accounting is based. The following are the important accounting concepts:-
- Separate Business Entity
- Money measurement Concept
- Cost Concept
- Accounting Period Concept
- Realization Concept
- Dual Aspect Concept
- Accrual Concept
- Matching Concept
According to this concept, business is treated as entity different from the owner. The transaction take place is only affect the business not the owner.
Money measurement Concept
This concept implies that only those transaction happen in the business related to the monetary will be recorded in the accounting book of the business.
Cost Concept
According to this concept, the assets purchased in the business are general recorded in the business
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