ACCOUNTING

• Accounting is the process of recording financial transactions pertaining to a business.
• Accounting can be defined as the technique of financial reporting of economic activities.
• Accounting is a language of business used to communicate the matters relating to business operations to various individuals and institutions who are directly interested in the activities of business.
• Accounting is a service activity whose function is to provide quantitative information primarily financial in nature about economic entities that is intended to be useful in making economic decisions.
• Accounting is a process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the users of information.
• Accounting is the art of recording, classifying and summarizing in a significant manner, transactions and events which are, in part at least, of a financial character, and interpreting the result thereof.
• Book keeping is the science and art of correctly recording in books of accounts all those business transactions that result in the transfer of money or money’s worth.
• Summarization, analysis and interpretation is called accounting.
• Single entry system in book keeping records only one aspect of a transaction.
• Double entry system in book keeping records both the aspects of a transaction.
• Internal Users (Primary Users) in accounting are those within an organization who use financial information to make day-to-day decisions.
• External Users (Secondary Users) in accounting are people outside the business entity (organization) who use accounting information.
• Financial Accounting in accounting is used to ascertain the profit or loss during a period and find the financial status of business to give information on the activities of business.
• Cost Accounting in accounting is used to ascertain the cost and control cost for planning and controlling the operations.
• Management Accounting in accounting uses accounting data collected from financial and cost accounting for profit maximization and loss minimization at different levels of management.
• Accounting Equation states that Assets = Liabilities + Equity.
• Total Liabilities = Total Assets.
• Owner’s Equity + Outside Liability = Assets.
• Transaction in accounting is an activity which involves transfer of money or money’s worth.
• Debtor in accounting is a person who owes money to the business.
• Debt in accounting is the amount due from a person or business.
• Creditor in accounting is a person to whom money is payable.
• Liability is an amount which a business is liable to pay for some benefit
• Account: Summary of various business transactions relating to a particular person
• Loss: Amount lost without any benefit
• Output of accounting permits informed judgments and decisions by the user of accounting information.
• Sales: It's the money the business earns from selling its products and services
• Accounting is considered as a language of business.
• Equities: Claim against the assets of the firm
• Capital: amount invested by the owner in the business
• Expenditure is an amount to acquire an asset
• Drawing: It is the amount or goods withdrawn by proprietor for personal use
• Stock: unsold goods at a given period
• Expense: An amount incurred in return for some benefit of revenue nature
• Income: It is a source of revenue due to its operations which increases owner’s equity
• Assets: properties or the right owned by business
• The Object of book-keeping is to summarize the variable.
• The objectives of the accountant include recording monetary transactions and events, ascertaining earnings, identifying obligations and resources, maintaining records statutorily, and providing information for financial decisions.
• Purpose of accounting is to find results of operations of transactions and events of financial character in activity of business and to report financial strength of business.
• Basic accounting principles include objectivity principle, historical cost, revenue recognition principle, expense recognition principle, adequate disclosure, materiality, consistency, and matching principle.