Accounting makes different people imagine different things; some may relate the term to cash; for others, keeping a daily count of expenses is the only way they resonate accounting with. So what is accounting, and what does it incorporate. But, first, let’s learn a bit about public finance.
What Is Accounting?
The truth is different scholars and various academic institutions define accounting differently. However, if you create a daily understanding and research it for a few years, you have your definition.
Here is what Smith and Ashburne have to say. According to them, accounting records and scientifically classifies a business transaction. The financial character makes justifiable summaries and examines and explains the transactions and events. Then it expresses the results to the decision maker or the one who makes a judgment.
The Committee on Terminology is quite direct with its definition. They call accounting an art of recording, classifying, and summing up money, transaction, and event in a significant way that highlights their financial character and the result thereof.
This accounting definition draws the nature, scope, and substance of accounting from transaction recording to sending the results to the concerned parties.
Aspects Of Accounting
Today, everybody uses accounting. It is the language of finance. Therefore, it is beneficial to know the term in detail. In addition, it would help you recognize its aspects to understand the subject clearly.
- Economic Events-it talks about the situation when a company has to make numerous transactions. For example, purchasing new machinery or vehicles or installing machinery on-site is an example of an economic event.
- Identification, Measurement, Recording, and Communication-An organization must outline the accounting system so that individuals must identify, measure, record, and communicate the accurate data or information to the right person at the right time.
- Organization-In refers to the scale of activities and standards of a business operation.
- Interested Users of Information-It is the correspondence of significant financial data to the customers, based on which they will make the correct decision.
Components of Accounting
An enterprise possesses various items; all that have economic value are termed as assets. From a different perspective, all things that generate income or can be transformed into cash are called assets.
Anything of economic value that a company is obligated to pay to another establishment or individual is a liability for a company. Usually, liabilities arise out of previous transactions.
It is one of the three most crucial parts of a business. In simple terms, it depicts the proportion of the total company’s assets that an owner or shareholders can claim from a business.
The main object of Accounting is to ascertain the results of the financial transactions of a business concern.
Objectives Of Accounting
The primary objective of a company is to ascertain the results of a financial transaction of a business. The other goals include:
Identifying and recording transactions
Accounting tries to identify the financial transactions and record them in its books to keep details of every transaction in a journal, then permanently saving them in a ledger. It reduces the stress of keeping everything in mind.
Ascertainment of results
Every business concern wants to know the results of its operation after a specific period. For example, a company can ascertain the profit or loss results from an income statement. The revenue ledger account balances help to perform the job.
Non-trading companies can also know their surplus or deficit; they must prepare their income and expenditure statements.
Ascertainment of financial affairs
Accounting aims to ascertain the debts and liabilities, properties and assets – the total financial affair of a company on a specific date. The best way out is through a balance sheet. The statement contains the assets and liabilities on a particular date.
Keeping accounts of cash
Cashbook is one of the leading books of accounts that record the cash receipts and payments, cash in hand, cash at the bank and daily cash. Maintaining it scientifically and accurately reduces money misappropriation, forgery or fraudulent activities.
Control over assets and liabilities
a business can run successfully if it acquires new assets like land, building, machinery, etc. similarly, it faces various debts and liabilities like payable accounts, notes, loans, bank overdrafts, etc. Keeping accounts properly helps ascertain the actual position of both sides of the balance sheet, and controlling it maintains the balance.
Controlling money defalcation and cost
The main objects of accounting are the prevention of money defalcation through fraud and forgery and controlling the cost of concern. For more details read My Assignment Help Reviews
Prevention of money defalcation and cost control becomes easier if accounts are kept scientifically.
Proidving economic data
Accounting also aims to provide economic information to parties concerned by providing them with financial statements and reports in time. For more writing click here
Accounting is a phenomenon yet a part of our everyday world. The above discussion does not cover everything about accounting; it is just a bird’s eye view to give you the fundamental accounting concept. I hope to clear any misconceptions about accounting. The next time anyone tries to teach you anything about accounting, you will not be misled or can take Financial Accounting Assignment Help.
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