What Is Accounting? Accounting Process
Book-Keeping: Book-Keeping and accountancy are the two allied subjects of the branch ‘Financial Accounting’. Book-Keeping is an activity concerned with the recording of financial data relating to business operations in a significant and orderly manner. Book-Keeping is the record making phase of accounting. Accounting is based on a careful and an efficient book-keeping system.
What Is Accounting?
Book-Keeping is mainly concerned with recording of business transactions in books of account. Accountancy goes a step further. It includes not only recording of the business transactions but also summarising the transactions, analysing and interpreting their effect on working of the business.
Accounting is the process,science as well as the art of recording all daily financial transactions of the Firm or any Business Entity.
American Institute of Certified Public Accountants defined accounting as, “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof.”
Objectives of Accounting:
- To maintain full and systematic records of business transactions.
- To ascertain profit or loss of the business.
- To know financial position of the business.
- To provide accounting information for legal and tax purpose.
- To review Business policies in the light of the past record.
- To have important information for legal and tax purpose.
- To find total expenses and profit of the firm.
Accounting cycle is known as accounting process.It contains of the following stages.
- Recording of entries for all business transactions in journal.
- Posting of entries into ledger.
- Balancing of accounts.
- Preparing of trial balance with the help of Trial Balance.
- Preparing final accounts with the help of Trial Balance.
-Trading and profit and loss account to know the Profit or Loss.
– Balance Sheet to know the financial Position.