Scope of Accounting

Accouning:-
Meaning:Accounting is defined as "the art of recording, classifying and summarizing in terms of money transactions and events of financial character and interpreting the results thereof."
Definition
The systematic recording, reporting, and analysis of financial transactions of a business. The person in charge of accounting is known as an accountant, and this individual is typically required to follow a set of rules and regulations, such as the Generally Accepted Accounting Principles. Accounting allows a company to analyze the financial performance of the business, and look at statistics such as net profit.
FUNCTIONS OF ACCOUNTING:The functions of accounting are as follows:-
Recording: This is the basic function of accounting. It is essentially concerned with not only ensuring that all business transactions of financial character are in fact recorded but also that they are recorded in an orderly manner. Recording is done in the book "Journal". Classifying: Classification is concerned with the systematic analysis of the recorded data, with a view to group transactions or entries of one nature at one place. The work of classification is done in the book termed as "Ledger". Summarizing: This involves presenting the classified data in a manner which is understandable and useful to the internal as well as external end-users of accounting statements. This process leads to the
preparation of the following statements: (1) Trial Balance, (2) Income statement (3) Balance sheet. Analysis and Interprets: This is the final function of accounting. The recorded financial data is analyzed and interpreted in a manner that the end-users can make a meaningful judgment about the financial condition and profitability of the business operations. The data is also used for preparing the future plan and framing of policies for executing such plans. Communicate:
The accounting information after being meaningfully analyzed and interpreted has to be communicated in a proper form and manner to the proper person. This is done through preparation and distribution of accounting reports, which include besides the usual income statement and the balance sheet, additional information in the form of accounting ratios, graphs.
The scope of Accounting:1. First step is to identify the events and transactions which are of a financial character. With the help of bills and receipts an accountant can identify these transactions. 2. Recording of transactions in the books of account is in terms of money and not in terms of quantities. So, after identifying the events or transaction, it needs to be converted or expressed in terms of money. Most of the transactions are happening in terms of money only. But in some causes, transactions in terms of quantity needs to be converted in terms of money. 3. After identifying and measuring the transaction, it needs to be recored in a book called 'Journal' or one of its sub divisions. 4. Next is grouping or classifying the transactions. Transactions which are of similar nature can be recored in one book. For example rent paid can be recored in a separate book called Ledger. In the ledger a separate account is opened for each items like, rent account, electricity account, salary account, wages account, stationary account etc. Wages paid during the year comes under the heading "Wages Account". This will enable the business owner to find out the total wages paid during the month or year by adding up the wages spent during the month or year. 5. After classifying and posting in different accounts, you will have a good quantity of data available with you. It is difficult to look all the account heads separately to understand the financial position of the business. To make it easy, the accountant will summarize all the data in a meaningful from called profit and loss account. By writing all the expenses on one side and the incomes on the other side. The difference between the totals of income and expenditure is the profit or loss of the business. Another form of expressing the financial status by arranging the assets and liabilities in a table which is known as Balance sheet. From the balance sheet we can understand the financial position of the business. Profit and loss account and Balance Sheet are the summary of all the transactions recorded in the journal and ledger.
6. By using statical tools like averages, ratios, percentages, graphs etc. the results can be analyzed and interpreted. This analyzed data can be reported to the interested parties which is easy to understand without going through thousands of entries made in the journal and ledger. An independent auditor can be employed to do the checking/auditing and making report of the account. Generally a certified Chartered Accounted will do the work of auditing and reporting. This report is very useful for taking decision by the owner or management or by interested parties of the business like bankers, tax authorities etc.

Scope of Accounting

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Accouning:-

FUNCTIONS OF ACCOUNTING:The functions of accounting are as follows:-

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