Accounting may be defined as the process of recording, classifying, summarizing and interpreting the financial transactions and communicating the results thereof to the persons interested in such information.
Accounting as an information system is the process of identifying, measuring and communicating the economic information of an organization to its users who need the information.
Functions of Accounting
ACCOUNTANCY, ACCOUNTING AND BOOK-KEEPING
ACCOUNTANCY: systematic knowledge of accounting. It explains ‘why to do’ and ‘how to do’ of various aspects of accounting.
ACCOUNTING: actual process of preparing and presenting the accounts. It is the art of putting the academic knowledge of accountancy into practice.
BOOK-KEEPING: recording of daily business transactions in a systematic manner.
BRANCHES OF ACCOUNTING
Sequential steps involved in an Accounting Cycle:
USERS OF ACCOUNTING INFORMATION
Government and their agencies
OBJECTIVES OF ACCOUNTING
To maintain records of business.
To calculate the results of operations.
To ascertain the financial position.
To communicate the information to the users.
To file tax return
To portray the liquidity position
ADVANTAGES OF ACCOUNTING
Facilitates to replace memory
Facilitates to comply with legal requirements
Facilitates to ascertain net result of operations
Facilitates to ascertain financial position
Facilitates the users to take decisions
Facilitates a comparative study
Assists the management
Facilitates control over assets
Facilitates the settlement of tax liability
Facilitates the ascertainment of value of business