Accounting (ACCOUNTING) – Accounting is made up of the sum of two digits; article and notation; writing means writing and notation means marks. Writing an event in digits is called accounting. When we buy or sell any goods or make transactions in a business, it is called accounting only when it is written in accounts. All the transactions, income, expenditure, assets-liabilities (ASSETS-LIABILITIES) and all other things related to the business, which are described, is called accounting.
There are three main elementary functions of accounting.
1. RECORDING (Recording)
2. CLASSIFICATION (Classification)
3. SUMMARISING (Abbreviation)
1. Recording – Recording is the first time any transaction is written to an account. The recording is also known as Roznamcha / JOURNAL / DAILYBOOK.
2. Classification – Classification of transactions written in different accounts is called classification.
3. Summarising – Summarizing classified items is called summarization. It is also called Talpat / Trialbalance.
Features of accounting (CHARACTERISTICS) –
1. Business transactions are partly or wholly financial in nature.
2. Business deals can be expressed in currency.
3. In accounting, the transactions are first recorded in Dialydairy and after that they are classified into accounts.
4. It is the process of analyzing and executing articles.
5. After analyzing the articles, they are sent to those people who conclude and decide on it.
Benefits of accounting –
1. No matter how intelligent a person is, he cannot remember the entire transaction of the business – purchase, sales, wages, salaries, bonuses etc., so accounting is done.
2. Accounting shows us various things like:
a. The profit and loss of the business is known.
b. It is known about how many assets and liabilities are there in the business.
c. The economic status of the business is known.
d. The cash and credit of the business is known.
4. We can easily determine salary, bonus, allowances etc. of employees from financial accounts.
5. In the event of a trade dispute, the accounts may be presented as evidence in the court.
Functions of accounting –
1. Basic work – This work involves classification and preparation of accounts in the journal paper.
2. Explanatory Functions – This work involves the interpretation of financial statements and reports for the people who need information related to accounting.
3. Statutory work – Under this work the requirements of various laws like Companies Act, Sales Tax Act, Income Tax Act etc. are fulfilled. Preparation of annual accounts under the Companies Act, sending sales tax returns under the Sales Tax Act and sending income tax returns under the Income Tax Act.
4. Communication work – To communicate the financial status of the business and other related information to third parties and managers who need them.
5. Assist in decision making – Accounting provides the necessary information which helps in decision making.
6. Accounting of Assets – Each business has different assets. The details of which are necessary so that the assets can be protected.
Accounting objectives –
1. In this, all the transactions of the business are done in a complete and systematic manner.
2. Its purpose is to find profit and loss.
3. Its purpose is to find out the financial position of the business.
4. To provide various information to different aspects of the business (employees, managers, creditors and investors) who keep business in mind.
GYAAN CLASS 