Importance of practical accounting in professional level

1. Logic of Accounting
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Researcher – KARTHIK O
Presentation Title – Importance of practical accounting in professional level
Research Focus – Lack of focus on the practical level accounting and the problems caused to the
modern day accountants due to the mere focus on the theoretical aspect of the academic
curriculum.
Researcher Level – Professional
The theoretical context of accounting in both graduation and post graduation level is much
different from that of the practical/business level accounting in its practice. Even though there
exists a correlation between the both, practical accounting has got much wider sense. The problems
faced by today's new generation accountants are the lack of proper knowledge in practical
accounting, even though they are educationally qualified for the particular vocation.
I, being a former accountant and a part-time tutor, presently working in the Finance Department
of a reputed organization, have seen many of such cases, where in the new generation commerce
graduates are unable to handle practical business accounting with ease. This is due to the lack of
practical accounting training in our education system. Most of the universities in India, especially
in Kerala are not providing enough guidance to the upcoming professionals in regard to vocational
based training. This doesn't mean that theoretical accounting is having no/less importance in regard
to career development. The theoretical aspect of accounting provides a strong foundation to the
students, on the base of which, the practical aspect of accounting is to be built, which results in
creation of qualified working professionals in the field of accounting.
The young professionals of our country still view accounting in a narrow sense. According to most
of them, the term accounting just means “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”. It is said to be in narrow sense because the
modern practical accounting, using erp software packages, are mostly focused to recording of

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voucher entries and the rest of the processes are compiled automatically by these software
packages.
They are not much concerned about the wider sense of accounting, giving much importance to
how and why transactions are recorded, classified and summarized and how a financial statement
of a real business organisation is analysed and interpreted. Most of them are not even concerned
about how and why the financial performance of a business organisation is reviewed. Some of
them only focus on the profit value and never focus on the Cost/Expense value. These are all due
to the lack of proper knowledge of accounting in the practical sense, which can lead to great
problems in today's business world.
I think it will be much more beneficial for the upcoming professionals, if they are taught
accounting, focusing on the practical aspect with a strong base of theoretical aspects of accounting.
This will ultimately result in proper and systematic financial accounting, management and control,
which would lead to increased financial performance and economic development in our country.
One of the basic problem which students are facing is in regard with the basic journal entries. Let
me give a brief example about the same through an example.
When ever we deposit cash into the bank account, the actual journal entry is –
Bank Account Dr
To Cash Account
But some students always have a doubt, why is this entry made and
what is its relevance. Some of them even thought that the journal entry should just be the contrary
of the original. It is not the problem of those students, but it is purely caused due to the mistake in
the way they are taught. Each and every journal entries are formed on the basis of Accounting
rules. There are two approaches for finding debit and credit aspects of transactions. One is
English/British/Traditional approach and the other is American/Modern approach. Both of these
approaches clearly states the same concept in different ways.

3. Logic of Accounting
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For example, the traditional approach states that the Bank Account needs to be debited because it
is a personal account, and the rule for the personal account is –
Debit the Receiver
Credit the giver
Hence, the bank account is debited because the cash is deposited in to the bank account.
The cash account is credited because it is a real account and the rule for the real accounting is –
Debit what comes in
Credit what goes out
As the value of cash is diminished and going out of the business, it is credited.
According to the Modern Approach, the bank account is debited because it is considered as an
asset and according to the rule an increase in the value of an asset needs to be debited and decrease
in value of an asset (cash) needs to be credited.
Hence, understanding each transaction in this format will surely help all the students and young
professionals to have a clear picture of the transaction and its journal entries and it is necessary to
educate the young professionals regarding the logic of accounting.
KARTHIK O 28.08.2023