An Explanation on meaning of Accounting
It is very common in human society that when any person starts a business, he/she wants to record all the financial data in written formats either using pen and paper or digital/electronic mode for proper future planning of his/her business.
When the record keeping procedure follows a systematic and chronological order which can be easily used by the business owners/users,that systematic procedure is termed as 'Accounting'.
The American Institute of Certified Public Accountants(AICPA) states/explains/defines that "Accounting is an 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'".
The term "Accounting" can be explained by the following way for an easy understanding.
In the field of Accounting,mainly three sub-fields/branches are taken into consideration.
Financial Accounting
Cost Accounting
Management Accounting
Financial Accounting:
Financial Accounting is an Accounting process, which is aimed to know the Profit and Loss and Financial Position of a Business at the end of a particular period.
Explanation :
Financial Accounting is an art and technique of
Recording
Classifying
Summarizing and
Communicating the Results
More details on Art and Technique of Financial Accounting
Recording Phase
Preparation of documents like Money Receipt/Credit Voucher, Payment/Debit Voucher,Purchase and Sales Invoice etc.
Recording/Posting/Writing the transactions into Journal Book/Journal Register/Journal Proper/Books of First Entry.
Classifying Phase
Posting of Recorded or journalized transactions into their respective Ledger Accounts.
Summarizing Phase
Preparation of Trial Balance, Manufacturing, Trading, Profit & Loss Account and Balance Sheet etc.
This phase is popularly known as Preparation of Final Account.
Communicating the Results Phase
Presentation of Summarized data in the form of Manufacturing, Trading, Profit & Loss Account and Balance Sheet etc. to the Internal and External users of Accounting.
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