1)What is Accounting?
Answer: Although Accounting is used by almost all the persons and institutions but accounting, as an organised activity, is associated with business everyday. A systematic record of all the transactions is essential for every business so that profit of business and its financial position may be correctly ascertained for a business, accounting is called the "LANGUAGE OF BUSINESS".
2)How do we define accounting?
Answer: According to 'American Accounting Association' ACCOUNTING IS THE PROCESS OF IDENTIFYING, MEASURING AND COMMUNICATING ECONOMIC INFORMATION TO PERMIT INFORMED JUDGMENTS AND DECISIONS BY USERS OF THE INFORMATION.
According to this definition, accounting is a processing system whose input is financial transaction and output is financial statements communicating various informations to various interested group, Thus we can conclude:-
b)classifying and summarizing of transactions,
c)interpreting,
d)communicating.
2 . Accounting requires transactions to be expressed in terms of money.
3 . Accounting is not confined only to recording but also related to interpreting the results.
4 . Accounting helps in communicating information to various groups interested in them.
3) What are the functions and objectives of Accounting?
Answer: 1)To keep SYSTEMATIC RECORDS - Accounting is done to keep a systematic records of financial transactions.
2)To protect BUSINESS PROPERTIES - Accounting provides protection to business properties from unjustified and unwanted use. This is possible on account of accounting supplying the following information to the manager or the proprietor:-
a) The amount of the proprietor's funds invested in the business.
b) How much the business has to pay to others?
c) How much the business has to recover from others?
d) How much the business has in the form of:
Answer: Although Accounting is used by almost all the persons and institutions but accounting, as an organised activity, is associated with business everyday. A systematic record of all the transactions is essential for every business so that profit of business and its financial position may be correctly ascertained for a business, accounting is called the "LANGUAGE OF BUSINESS".
2)How do we define accounting?
Answer: According to 'American Accounting Association' ACCOUNTING IS THE PROCESS OF IDENTIFYING, MEASURING AND COMMUNICATING ECONOMIC INFORMATION TO PERMIT INFORMED JUDGMENTS AND DECISIONS BY USERS OF THE INFORMATION.
According to this definition, accounting is a processing system whose input is financial transaction and output is financial statements communicating various informations to various interested group, Thus we can conclude:-
1 . Accounting is a process of comprising:-
a) recording of transactions, b)classifying and summarizing of transactions,
c)interpreting,
d)communicating.
2 . Accounting requires transactions to be expressed in terms of money.
3 . Accounting is not confined only to recording but also related to interpreting the results.
4 . Accounting helps in communicating information to various groups interested in them.
3) What are the functions and objectives of Accounting?
Answer: 1)To keep SYSTEMATIC RECORDS - Accounting is done to keep a systematic records of financial transactions.
2)To protect BUSINESS PROPERTIES - Accounting provides protection to business properties from unjustified and unwanted use. This is possible on account of accounting supplying the following information to the manager or the proprietor:-
a) The amount of the proprietor's funds invested in the business.
b) How much the business has to pay to others?
c) How much the business has to recover from others?
d) How much the business has in the form of:
*Fixed assets.
*Cash in hand.
*Cash at bank.
*Stock of raw materials, work-in-progress and finished goods.
3)To ascertain the operational profit and loss:- Accounting helps in ascertaining the net profit earned or loss suffered on account of carrying the business. This is done by keeping a proper record of revenues and expenses of a particular period. The Profit and Loss account is prepared at the end of a period and if the amount of revenue for the period is more than the expenditure incurred in earning that revenue, there is said to be a profit. In case the expenditure exceeds the revenue, there is said to be a loss.
4)To ascertain the financial position of the business:- The Balance sheet is a statement of assets and liabilities of the business on a particular date. It serves as a barometer for ascertaining the financial health of the business.
5)To facilitate rational decision-making:- According these days has taken upon itself the task of collection, analysis and reporting of information at the required points of time to the required levels of authority in order to facilitate rational decision-making.
6)To communicate the results:- Accounting communicates the results obtained from arranging of data to interested parties like Investors,Creditors,Employees etc.
7)To meet legal requirements:- The last objective of accounting is to device such a system which will meet the requirements under the provisions of Sales Tax Act, and Excise Act etc.
3)To ascertain the operational profit and loss:- Accounting helps in ascertaining the net profit earned or loss suffered on account of carrying the business. This is done by keeping a proper record of revenues and expenses of a particular period. The Profit and Loss account is prepared at the end of a period and if the amount of revenue for the period is more than the expenditure incurred in earning that revenue, there is said to be a profit. In case the expenditure exceeds the revenue, there is said to be a loss.
4)To ascertain the financial position of the business:- The Balance sheet is a statement of assets and liabilities of the business on a particular date. It serves as a barometer for ascertaining the financial health of the business.
5)To facilitate rational decision-making:- According these days has taken upon itself the task of collection, analysis and reporting of information at the required points of time to the required levels of authority in order to facilitate rational decision-making.
6)To communicate the results:- Accounting communicates the results obtained from arranging of data to interested parties like Investors,Creditors,Employees etc.
7)To meet legal requirements:- The last objective of accounting is to device such a system which will meet the requirements under the provisions of Sales Tax Act, and Excise Act etc.
Hello there, I have found these answers very useful in understanding the basic concept of Accounting. Many people don't know the Sales Tax Act, Excise Act etc... and hence they face loss and in worst situation they get caught in legal issues.
ReplyDeleteRegards,
Forex Fund Manager