Accounting refers to the actual process of preparing and presenting
the accounts.
“the process
of identifying, measuring and communicating economic information to permit
informed judgments and decisions by the users of accounts”.
An accountant is
a practitioner of accountancy or accounting.
The word
"Accountant" is derived from the French word Compter, which took
its origin from the Latin word Computare. The word
was formerly written in English as "Accomptant".
Like in comptroller evolved in the 15th
century through a blend of the French compte ("an account") and French contreroule "counter-roll,
scroll copy", thus who specializes in checking financial
ledgers
Why we need
Need and Importance of Accounting
To live we
should earn. Earnings comes in many ways. Salary, business income, others like
bank interest, etc. salary n others is a direct income which we can spend
fully, does not need much FA.
For Business
income its little tough to say what we earn is fully available for personal
exp. For ex. Sales for Rs.100. Is that 100 fully be taken to our home. Is it
our real profit? Yes or no? to decide we have to see the expenses we incurred.
We have to
see How much we earned. Do we really earn or not. For that we need FA.
double-entry
bookkeeping first
emerged in northern Italy in the 14th century, where trading ventures began to
require more capital than a
single individual was able to invest. The development of joint-stock
companies created
wider audiences for accounts, as investors without firsthand knowledge of
their operations relied on accounts to provide the requisite information.[6] This
development resulted in a split of accounting systems for internal (i.e.management
accounting) and
external (i.e. financial
accounting) purposes
To
get details of the business transactions have to be recorded in a clear and systematic
manner to get answers easily and accurately for the following questions at any
time:
1.
To
maintain accounting records.
2.
To
calculate the result of operations.
3.
To
ascertain the financial position.
4.
To
communicate the information to users.
5. Taxation
6. Management decision-making,
7. Legal requirements
Book-keeping is recording of business transactions,
only those transactions related to business which can be expressed in terms of
money arerecorded.
Activities of book-keeping are journal, posting to the
ledger and balancing of accounts (TB)
Accounting steps:
Journal, posting to the ledger, Bank Reconciliation
Statement, Trial Balance and Rectification of Errors, Capital and Revenue
Transactions, Final Accounts.
