Introduction to accounting .
Accounting is a systematic process of recording classifying summarising analysing and interpreting the financial transaction and communicating the results to the users .
From the accounting process we come to know about the things related to firm or Enterprise :
1. It shows the profit earned or or loss incurred during the accounting period
2. It shows the Assets of company.
3. It even shows the liabilities of the company .
4. Its shows the owners equity that's capital .
Characteristics of accounting:
1. Identifying the financial transaction : accounting not only records those events and transaction made or done by the company which can be measured in terms of money or which has an economical value.
2. Recording: accounting is an art of recording financial transaction. Recording is a process of saving the transactions made by the company which can be measured in terms of money .
3. Measuring the identified transaction : financial transaction are measured in terms of money are recorded in the books of account and other events which cannot be measured in terms of money are not recorded in the books of account simply .
4 . Classifying: classifying is the process of grouping transactions of one kind at one separate place. The transactions which are recorded in journals 2000 posted in the main book that's called ledger.
5. Summarising : summarising means representing the classified data in an proper manner which is understandable to its various uses. Summarising helps in preparation of trial balance from which trading and profit and loss account is prepared and balance sheet is also prepared which shows the Assets and liabilities of a company .
6. Communicating : accounting process communicates the financial statement of the company to its user and would help its owners stakeholders shareholders to take decision at a right time .
Objective of accounting :
1. Maintaining accounting records: one of the most important objectives of accounting is to record all the financial transaction of a company in a proper manner by following the principles of accounting .
2. Determining profit and loss: another objective of accounting is that to determine or calculate whether the company has made profit or loss and this financial statement it is known as income statement .
3. Determining financial position : every company wants to know its financial position that whether they have make profit or loss during the accounting period. Through their trading and profit and loss account then come to know about their profit and losses incurred during the accounting period. Through their balance sheet they would come to know about their Assets and liabilities .
4. Facilitating management : the owners stakeholders shareholders required up to date financial information about the company to take effective decisions regarding the company and accounting give the the up-to-date information to its owners .
5. Protecting business assets : according another objective is to keep records of assets that the company owns and which enable in managing them keeping a track on them and protect it .
6. Providing financial information : accounting helps in providing financial information regarding the financial health of the company to its user which helps them to take decisions regarding the company which will lead the company towards growth and accounting provides all information to its owners stakeholders shareholders.
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