What Is Accounting ?
Accounting is a process of identifying, collecting, summarizing and recording the financial transactions of business to reveal net results (profit or loss) and to evaluate the financial position of the company. It provides accurate financial data and information that helps the management to make sound decisions.
Essential Features Of Accounting You Need To Know
Some of the notable characteristics or features of accounting can be highlighted as follows:
1. Accounting Can Be Considered As Both Science And Art
It is a science because it is practiced and maintained on the basis of fixed principles. Accounting is an art because it requires specific knowledge practical work.
2. It Is A Systematic Process
It is a process of recording business transactions (transactions of financial nature), classifying and summarizing them in a chronological and systematic manner and to interpret the financial information.
3. It Deals With Monetary Terms
Accounting deals with financial items ( can be expressed in monetary terms) only. Non financial transactions are completely ignored.
4. Accounting Is An Information System
It is an information system that gathers financial data, summarizes them and provides financial information to the management and other users.
Also Read:
Also Read:
5. It Ensures Reliability And Accuracy
Accounting is a reliable method of recording and interpreting financial results of the business because it is based on fixed principles and requires specific knowledge to maintain proper accounting system in the organization.
6. Comparability
Financial results of current period can be easily compared with the results of previous period.
7. Summarizing Financial Data
Accounting summarizes financial data and reflects the financial health of the company. Financial statements such as balance sheet, income statement and cash flow statements helps evaluate the performance of business.
8. Helpful In Budgeting And Planning
It provides historical financial data that helps the managers to create budget and make future financial planning.
9. Assisting In Cost Control
Accounting tracks and monitor costs that helps the management to reduce unnecessary expenses and wastage that helps to save costs.
10. Detect Fraud And Mistakes
Regular audits help to detect fraud and mistakes in the process of accounting. So, it enhance arithmetical accuracy and financial security.