Accounting Details

ACCOUNTING
It is all the more necessary for an organisation or a concern to keep proper accounts. At the end of the year the true result of the economic activities of a concern must be made available otherwise it will nod be possible to run the concern. In case of a business concern the profit or loss at the end of a year must be ascertained, because, the amount of profit must be adequate in relation to that of investment made in the business. If it is not so or if there is a loss, it is an indication of some defects existing somewhere in the management of the business. All such defects need to be detected and analysed and appropriate measured taken for their, rectification. But it is only possible, if proper books of accounts are maintained in the business concern. So, the importance of book-keeping to a business is the same as that of fresh air to • man to exist. Without book-keeping records a business would meet death, though not instantly, but in < short time.
Moreover, if proper books of accounts are not kept in a business, the amount of profit cannot be ascertained and it will not be possible to distribute the profit among the owners of the business. The income tax dues to the Government cannot also be paid. In the absence of books of accounts misuse or defalcatio* of money will remain undetected. The owner and other parties interested will not be able to have any information about the condition of the business. For the same reason in the case of non-trading concern* like, schools, clubs, colleges, universities, hospitals etc. the need for accounting is universally recognised.
Thus we see that the necessity of keeping accounts is not only confined to business concerns but tj is also useful for all classes and grades of people and organisations.
ACCOUNTING: A BUSINESS LANGUAGE
Accounting is a language, a system that communicates information. It is often referred to as thej language of the business, although it is just as important in the operation of government agencies, clubsj colleges and other kinds of organisations.
You probably have some idea already of what the term accounting means. It is frequently used u every day conversation to mean "answering for responsibility," Managers of business concerns an answerable to owners, creditors, labour unions and Government agencies etc. Managers of governmeM units are answerable to chief executives, boards, taxpayers and others. In fact, accounting was developed b] people, who were seeking better ways to gather and report useful information about organisations.
Some type of orderly system is needed to account for an organisation of any size and complexitjJ An accounting system is used to collect, process and report needed data about a business, government uniu or other type of association. Information1 is usually collected, processed and reported in financial temj which simply means that 'money' is the basis of measurement.
Many authors have defined the term "Accounting" in different ways. There is difference of opimo^ among the authors as to its precise definition as the term 'accounting is so broad that it is difficult to gi\e precise definition. However, several possible definitions are given below:
"The act of collecting, processing, reporting, analyzing, interpreting and projecting financuinformation".
he system of providing quantified information about an organisation to people who need siinformation."
The process of identifying, measuring, and communicating economic information to perrinformed judgments and decisions by users of the information."
Of all the definitions available the most accepted is the one given by the American Institute Certified Public Accountants Committee on Terminology According to it.
"Accounting is the art of recording, classifying and summarising in a significant manner and it terms of money, transactions and events, which are, in part at least, of a financial character, and interpret the result thereof. An analysis of the definition will enable us to have a thorough idea of the functions accounting. The salient features of the definition are Read more....