According to "American Institute of Certified Public Accountants"
Accounting is 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.
Above definition may not be understand by yourself because of its tough language, lets give it a simple look.
whenever your mother asks you to go to the nearby shop store to buy from it items of daily use like soap, coffee, spices, rice, sugar, candle stick etc. you need not pay for these items immediately because you are purchasing in credit. when you buy these items, the store owner immediately opens the page of a register on which your father's name is written. shop owner records the value of items purchased by you. In the same manner, he keeps the records of other customers also.
whenever he gets goods from suppliers in credit, he records it and also record the payment when he made it. Have you ever thought why do they keep record of business transactions? If they do not keep the record how will they know how much they have purchase and sale goods on credit and also how will they know when they have to make payments and when they are to receive payments or what they have earned during a particular period.
Recording of transactions by a businessman in proper books of accounts and in a systematic manner is known as Book keeping.
Accounting is 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.
Above definition may not be understand by yourself because of its tough language, lets give it a simple look.
whenever your mother asks you to go to the nearby shop store to buy from it items of daily use like soap, coffee, spices, rice, sugar, candle stick etc. you need not pay for these items immediately because you are purchasing in credit. when you buy these items, the store owner immediately opens the page of a register on which your father's name is written. shop owner records the value of items purchased by you. In the same manner, he keeps the records of other customers also.
whenever he gets goods from suppliers in credit, he records it and also record the payment when he made it. Have you ever thought why do they keep record of business transactions? If they do not keep the record how will they know how much they have purchase and sale goods on credit and also how will they know when they have to make payments and when they are to receive payments or what they have earned during a particular period.
Recording of transactions by a businessman in proper books of accounts and in a systematic manner is known as Book keeping.
Now comes Accounting, Accounting starts where book keeping ends. It includes the following steps:
- Recording of transactions: Regular dealings of the business.
- Journal: It records the transactions in the form of Debit and Credit
- Ledgers: It is a Separate books of accounts like purchase ledger, sales ledger, debtors ledger, creditors ledger, expenses ledger etc.
- Trial balance: Closing balances of all ledgers. It is a statement prepared with the debit and credit balances of ledger accounts to test the arithmetical accuracy of the books.
- Final Accounts: It includes Trading account, profit and loss account and Balance sheet
- Communicating the information to the interested parties.
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