Accounts Complete Tutorial

Business entities and other organisations carry on activities which involve exchange of money or money’s worth or economic resources. Where the volume of these activities are large in number it is necessary that these are recorded for the purpose of taking important decisions to whether the activities are viable, gainful and are to be continued or not.

Information about the business and other organisations is required not only to the proprietor’s managers of business and other organisations but also to various other interested users such as the government, investors, customers, employees and researchers.

Meaning and Definition of Accounting:

American Accounting Association has defined accounting as “the process of measuring, and communicating economic information to permit informed judgements and decisions by users of the information”.

Accounting cycle:

Identifying the transactions and journalisingAccounting Masters
Posting and balancingInventory Masters
Preparation of trial balancePayroll Masters and
Preparation of trading accountStatutory Masters
Preparation of profit and loss accountStatutory Masters
Preparation of balance sheetStatutory Masters

Functions of Accounting:

The main functions of accounting are as follows:

1.Measurement

The main function of accounting is to keep systematic record of transactions, post them to the ledger and ultimately prepare the final accounts. Accounting works as a tool for measuring the performance of the business enterprises. It also shows the financial position of the business enterprises.

2.Forecasting

With the help of the various tools of accounting, future performance and financial position of the business enterprises can be forecasted.

3.Comparison

Accounting helps to compare the actual performance with the planned performance. It is also possible to compare with the accounting policies. Through comparison of the actual financial results of the business enterprises with projected figures and standards, effective measures can be taken to enhance the efficiency of various operations.

4.Decision making

Accounting provides relevant information to the management for planning, evaluation of performance and control. This will help them to take various decisions concerning cost, cost, price, sales, level of activity, etc

5.Control

As accounting works as a tool of control, the strengths and weaknesses are identified to provide feedback on various measures adopted. It serves as a tool for evaluating compliance of business policies and programmes.

6.Assistance to government

Government needs full information on the financial aspects of the business for various purposes such as taxation, grant of subsidy, etc. Accounting provides relevant information about the business to exercise government

Importance of Accounting

Systematic records
Preparation of financial statement
Assessment of progress
Aid to decision making
Satisfies legal requirements
Information to interested groups
Legal evidence
Computation of tax
Settlement during merger