Friends, we will discuss about accounting in this article. Apart from this, what is accounting, after this, we will its know about functions, features, objectives, and requirements. This is the first chapter of accounting. So, we first get to know the introduction of Accounting.
Introduction to accounting:
In the modern era, the form of economic activities of human beings has become wide and versatile. Because, without economic activities, human life is not easy. Thus, many types of trade and industry are rapidly developing and building.
1. In vogue since ancient times:
However, the act of keeping accounts in different forms exists from the time the business was born. Because, even a small businessman maintains an account by memory. Or he writes it down on paper.
2. Objective to earn profit:
In fact, business or industry makes life easier. People manufacture goods for use and people also get employment. Apart from this, one purpose of all business is to earn profit.
3. Knowledge of the economic situation:
Hence, it is necessary for the businessman or industrialist to have knowledge of the profit and loss and economic condition of the business. Because the success and failure of business depends on its economic condition. For this, book-keeping and accountancy methods are widely used in business.
4. Helps in conducting business successfully:
Business books get information about their economic status and profit and loss from accounting books. However, book-keeping and accountancy are not mandatory for the merchant. But, business operations will not be able to operate successfully without it. Because, they will not get information about their trading activities and profit or loss.
5. Foundations of solid rules and principles based on analysis:
Merchants keep accounts systematically or unsystematically, this will be called accounting. In fact, as the size of the business increased, the nature of the business became complex. And in the process, accounting began to take shape. Furthermore, it laid the foundation for sound rules and principles based on logic, reason and its effect analysis.
Friends, thus general accounting is in front of us today in the form of mass accounting.
Meaning of accounting
Friends, there are billions of transactions in the business, because the size of modern business is very large. Furthermore, it is not possible to remember such a large number of transactions in mind.
Therefore, we keep a record of these transactions in order. In this way, accounting is the systematic knowledge and use of transactions. Also, accounting is the practical form of accounting.
In other words, accounting the events that occur in order to achieve a business objective is numbered. Furthermore, events here mean all actions in which money is exchanged.
1. Accounting is both art and science:
In fact, in the form of art it is helpful to know the financial result. Because, it has a summary of recorded and classified transactions and events. In addition, it also contains analysis and interpretation.
Furthermore, it is a systematic branch of science as it has definite rules for transactions, recording, classification and summarization. But it is not a complete science but an almost complete science.
2. Record of measurable in currency only
It contains only a description of events of a financial nature measurable in currency.
For example – if your business has some reliable and dedicated employees. You feel that your business is growing because of its loyalty. Accounting of such incidents does not occur in accounting.
3. Accounting itself does not create wealth
Friends, accounting itself does not create any wealth. However, it provides useful information to its users, which is helpful in the creation and maintenance of their wealth.
Objective of accounting
1. Writing business transactions in books in a sequential manner:
In fact, this is the first major objective. Because, every business transaction has to be written in books in a systematic way and keep proper accounts. Apart from this, it is also helpful to remove errors and omissions from methodical recording. Because the lack of accounting places a lot of weight on human memory, which is impossible to bear in most situations.
2. Prevention misuse of business assets
In general, it also protects against improper use of business assets. Because, this is possible due to accounting providing the following information to management.
Appropriated amount of funds in business. How much to give to a person and how much to collect. What is the stock of permanent assets of the business, cash in hand, bank balance and raw material, semi-manufactured goods and furthermore, manufactured goods?
In this way, you will understand. Because, the above information is also helpful for the business owner to know if any of his assets are inactive.
3. Assessment of profit and loss:
Its major objective is to determine the net profit and loss at the end of the accounting period. Because net profit is an indicator of business progress. Apart from this, it is also the basis of dividend distribution among the shareholders.
4. Knowledge of financial condition:
It is also important for the business to know its financial status. Because the profit and loss account does not contain enough information. Therefore, all its information is found in the balance sheet. In other words, the balance sheet is a description of the assets and liabilities of the business. Thus, it acts as a barometer to know the financial health of the business.
5. Helps in proper decision:
Friends, the finished accounting provides information about the entire financial situation of the business. Therefore, it is easier to take decisions in the interest of the prudent and the business.
Functions of accounting
1. Recording in a journal:
The first task of accounting is to systematically accounting all business deals and events in a journal. The thing to note here is that only those deals and events have to be accounted for which are financial in nature. Also, which is in the form of currency.
2. Classified Transactions:
After accounting the monetary transactions, classify them based on their nature and similarity. So, different information will be received for different items.
For example, all sales deals that are written at different locations. Show them in one place. So that the total sales amount is known.
3. Reporting all in one page:
Friends, business transactions are very large. That transaction is abbreviated as accounting balance sheet. In other words, the balance sheet is a page report. With this report, the decision-maker assesses the financial condition of the business in no time. Thus, it is easy to make clear and quick decisions with this abbreviation.
Accounting not only does accounting, classification, summarization but it also provides conclusions and useful information by interpreting those data.
What was the institution’s rate of accreditation?
How much did sales increase due to advertising?
What is the liquidity and payment status?
5. Transmission of Information:
In accounting, the analysis and interpretation of interpretations is carried over to other individuals or institutions. So that, they consider the financial condition of the business and also decide about their future plans.
For example- investor, creditor, government, shareholders.
6. Meeting statutory requirements:
The final task of accounting is to make arrangements in which all the statutory requirements are met. Because, fulfilling such a system is a legal imperative for the businessman.
for example –
It is necessary to present income tax, sales tax returns.
Accounting is essential for the success of modern business operations. So let us understand this with the following arguments:
- Business transactions are required to be written. Because there are countless transactions everyday, which is impossible to remember.
- It is necessary to keep proper details to prevent from dishonesty and forgery. Because, The memory can be denied, but no written description.
- The trader will be able to present his business income tax, sales tax only if he has the final accounting statement.
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