Accounting is about the recording, summarizing, analyzing, reporting and reporting of financial transactions. Let’s look at the components to better understand accounting.
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Recording
Accounting is most interested in the recording of all transactions within the company. Book-keeping is also known as accounting. It involves the recording of transactions and recognizing them.
Accounting is only concerned about the recording segment. Accounting keeps a few books to record the recording process. The procedure is maintained in a systematic way.
These are the three ways to record:
- In order to keep the records organized.
- Financial transactions can be tracked.
- To present the final set of financial reports, combine all reports.
Summarizing
Raw data is usually the result of transactions being recorded. These raw data do not have much value to an organization. These raw data have no role in decision-making. This is why accountants separate the raw data into different categories. The accountants then summarize the transactions.
Reporting
Management is responsible for the affairs of any company. Owners must be inform about all operations taking place within the company using their money. Owners receive reports to keep them informed about the various operations taking place within their company. These reports are sent out quarterly, and owners receive an annual summary of all their performance at the end.
Analyzing
The final step is to analyze all of the data. It is important to draw conclusions after recording and summarizing. The management is responsible for determining the positive and negative aspects.
Accounting introduces the concept to compare all this information. To analyze and determine the performance and growth in an organization’s performance, it is important to compare profits, sales, equity and other factors.
Accounting Objectives
Keep records
Accounting is, as we have already mentioned, the spoken language for transactions. The human brain can’t store infinite amounts of information. Accounting is responsible for keeping records of all transactions within a company.
Profit and loss
Profits are directly proportional to business. Profits are everything. It is all about making profits. Profit and loss is determine by income and expenditure.
Utility of Resources
They are an essential part of any company and play a crucial role in a firm’s ability to function well. Records are responsible for reporting to the company about all activities and their timing. It is easy for management to note the details before they put in the money.
Estimation of Financial Situation
Business people are interested in the Profit and Loss of their business. They also want to know how much he owes his creditors and what he must pay his debtors. He prepares a statement that contains all these details. This statement is known as Balance sheet. The Balance sheet can help you understand the financial position of your business.
It aids in decision making
All records kept by Accounting Procedures are available for use in making decisions. This information is crucial to the smooth operation of an organisation.
Accounting Fundamentals
Accounting is all about the acronym ALOE. It is not the same as the plant. ALOE is an acronym that plays an important role in accounting and accounting terminology. Here’s what “A-Lo-O-E”, the acronym, means.
- A – Assets
- L – Liabilities
- O E- Owner’s Equity
This is one the most fundamental concepts in accounting. This equation explains the concept of accounting.
Assets = Liabilities + Owners Equity
This is the meaning of each term ALOE stands for.
- Assets: These are items you own and are your assets. These items have a value and you can exchange them for cash. Examples of assets include Car, House, and others.
- Liabilities: Anything you own is a liability. A loan you get from a bank to purchase any type of asset is a liability.
- Owner’s Equity is the total amount of money that someone (anyone!) invests in an organization. It is not always money. It could also be in stock.
