Accounting provides essential financial information about a company's past performance and can help predict future performance. It begins with recording transactions, which are events that affect a company's financial position. Accountants prepare three main financial statements - the balance sheet, income statement, and statement of cash flows - to assess where a company stands financially. The balance sheet provides a snapshot of assets, liabilities, and owner's equity at a point in time, while the income statement shows revenues and expenses over a period of time. Accounting helps managers make informed decisions and ensures compliance with relevant laws.

1. The Need for AccountingAccounting information can be used to assess past
financial performance of a company and help predict
its future performance. All kinds of organizations—
government agencies, nonprofit organizations, and
others —rely on accounting to gauge their progress.
The accounting process begins with a transaction.
A transaction is any event that affects the financial
position of an organization and requires recording.
Where does
the organization
stand?
Accountants answer these questions
with three major financial statements:
Balance
sheet
Income
statement
Statement of
cash flows

2. Balance Sheet
The balance sheet (also called statement
of financial position or statement of financial
condition) is a snapshot of the financial status
of an organization at a point in time.
The balance sheet has two sections
(1) assets and
(2) liabilities
(3) Assets = Liabilities + Owners’ equity
Assets are economic resources that
are expected to benefit future
activities of the organization.
Liabilities :
are the entity’s economic
obligations to nonowners.
(1) Revenues and Expenses:
Revenues are increases in ownership
claims arising from the delivery
of goods or services.
(1) The company must earn the revenues. That is, it must deliver the goods or render
the services to customers.
Expenses are decreases in ownership
claims (stockholders’ equity) arising from
delivering goods or services or using up assets.

3. Income (also called net income, profits, or earnings), is the excess of
revenues over expenses.
The cash basis of accounting recognizes
revenue and expense when cash is
received and disbursed.
An accountant is a person who does the basic job of maintaining accounts as he is
the man who is engaged in book keeping. Since the managers would always want to
know the financial performance of the business. An accountant prepares profit and
loss account which reports the profits/losses of the business during the accounting
period, Balance Sheet, which is a statement of assets and liabilities of the business at
a point of time, is also proposed by all accountants. Since both statements are called
financial statements, the person who prepares them is called a financial accountant.

4. Objectives and Scope of Accounting
Let us go through the main objectives of Accounting:
To keep systematic records - Accounting is done to keep systematic record of
financial transactions. The primary objective of accounting is to help us collect
financial data and to record it systematically to derive correct and useful results of
financial statements.
To ascertain profitability - With the help of accounting, we can evaluate the profits
and losses incurred during a specific accounting period. With the help of a Trading
and Profit & Loss Account, we can easily determine the profit or loss of a firm.
To ascertain the financial position of the business - A balance sheet or a statement of
affairs indicates the financial position of a company as on a particular date. A
properly drawn balance sheet gives us an indication of the class and value of assets,
the nature and value of liability, and also the capital position of the firm. With the
help of that, we can easily ascertain the soundness of any business entity.
To assist in decision-making - To take decisions for the future, one requires accurate
financial statements. One of the main objectives of accounting is to take right
decisions at right time. Thus, accounting gives you the platform to plan for the future
with the help of past records.
To fulfill compliance of Law - Business entities such as companies, trusts, and
societies are being run and governed according to different legislative acts. Similarly,
different taxation laws (direct indirect tax) are also applicable to every business
house. Everyone has to keep and maintain different types of accounts and records as