In this series of articles it is proposed to cover the following topics. In this article I have discussed the first given below. More articles describing the other topics listed below may be published soon.

  • accounting meaning
  • Definition and objectives of Accounting
  • Accounting Systems
  • Branches of Accounting
  • Uses of Accounting
  • Limitations of Financial Accounting
  • Explanation of important accounting terms
  • The Accounting Cycle
  • Responsibilities of an accountant
  • Importance of data in accounting
  • Interested in accounting information

In today’s world, all our activities have some reason, that is, a purpose. In most cases. The purpose is to make profit, while in other cases the purpose may be social welfare, providing education, healthcare, etc. Whatever the purpose, the activity is likely to be an organized affair. Every organization has to use material resources, labor, services, capital and to work effectively, the people in the organization require information. Money must be spent carefully. If a person spends carelessly, there will come a day when he will run out of money. The same can be said of a business. A company receives money from different sources, such as the sale of goods, the sale of assets, the receipt of various income such as rents, interest, commissions, etc. You have to spend money on items like expenses, shopping, etc.

A businessman must run his business in such a way that he receives more than what he spends, otherwise he will have problems because he will have to cover the expenses of the original amount invested by him to start the business. Therefore, the capital of the company will be reduced due to this loss. If this process is allowed to continue for too long, all the capital in the business will be gone. If the businessman manages his affairs efficiently and if the receipts are more than the payments year after year he prospers and grows in size.

So, it can be said that the profit increases the capital and the loss reduces it. It should be noted that the profit or loss is the result of the cost of goods sold and sales. In actual practice, if a company is going to run at a profit, then it has to sell goods at a price that allows it to cover not only cost of goods sold, but also other expenses like rent, salary, interest, insurance , etc. Therefore, to make a profit, either sales must be kept high enough to cover all expenses, or expenses must be kept low so that they are completely covered by sales. In addition, the business also maintains certain property i.e. furniture, buildings, machinery, equipment, etc. Similarly, he also borrows money from time to time. To keep the property in good condition, pay debts on time, reduce expenses and increase sales, it is necessary to maintain constant vigilance, it is necessary for the business owner to be well informed of the behavior of these elements.

With a view to supplying such information, the art of accounting was developed. It provides the following information to merchants:

(1) How much total earnings will be during the period;

(2) What will be the expense during the period on wages, salaries, lighting, insurance, fees and taxes, etc.;

(3) How much the profit or loss will be;

(4) How much the capital will be and the causes of its increase or decrease; (5) Nature and value of the assets owned by the company;

(6) nature and amount of the liabilities;

(7) Customers who owe the business and the amount in each case;

(8) Suppliers to whom the company must make payments and the amount in each case; Y

(9) Other facts for the filing of sales tax or income tax returns.

accounting meaning

Bookkeeping is that branch of knowledge that tells us how to keep records of financial transactions. The need to record such transactions arises because

(1) it is difficult to remember the various financial payments and receipts that take place over a period of time;

(2) in modern forms of business organizations, control of the business rests with different people and the results must be reported to the owners;

(3) the financial information is required for costing, budgeting, forecasting and planning purposes; Y

(4) Accounting records must be submitted to various government agencies, such as income tax and sales tax authorities, for tax purposes.

Most of us keep some type of written record of our income and expenses. The essential idea behind keeping such a record is to show the correct position regarding income and expenses. Such recording must be clear and systematic so that it can be easily understood. It must show to whom a payment has been made, when and for what. The need to keep track of income and expenses in a clear and systematic manner has given rise to the subject of bookkeeping. Bookkeeping can be defined as such “as the art and science of recording business transactions in a systematic and chronological order.”

The need to record all transactions clearly and consistently cannot be overemphasized. Goods can be sold on credit to several people. The latter would pay the price of the goods to the seller later. The seller would like to know, from time to time, what amount is owed and to whom. However strong the memory, one cannot expect to remember all the details related to all transactions. Apart from this, the object of the business is to make a profit; and every trader likes to know at the end of a fiscal year how much profit he has made during the course of the year. For this purpose, you would need a lot of factual information that can be derived from written or computerized records of transactions, provided those records have been kept properly; in modern times using computer software such as HiTech Financial Accounting. As such, proper maintenance of account books is a must for a businessman.