Accounting is defined as “the art of recording, classifying and summarizing in terms of money transactions and events of financial nature and interpret their results.” In the simplest words, we can say:

(1) Accounting is an art

(2) recording the classification and summarize

(3) in terms of money

(4) Business and events of a financial nature and

(5) The interpretation of the results of its

Accounting is the art of properly recording the day-to-day business: It is the science of keeping business records in a regular and most systematic way so as to know business results with minimal trouble. Therefore, it is said to be a statistical method for the collection, classification and summarization of financial information.

aim Accounting

objective accounting are twofold:

(1) To remove permanently, all business, and

( 2) To show the impact of each transaction and also the cumulative effect of all such transactions in a certain period of time so as to find out the profit the company has won or loss, and also to know the correct financial position on a specific date

The necessity and importance accounting can be understood by the following questions :.

(1) How much we have won this year?

(2) How much was earned last year?

(3) Is the company recover directory?

(4) How much money do we have?

(5) How much money we owe?

(6) How much others owe us?

Accounting Systems

There are various accounting systems to maintain business records

Cash accounting system

[færslur19459002] This system only cash receipts and payments on the assumption that there are no credit transactions. If at all there are any credit transaction, they are not recorded until the money is actually paid or received. Receipts and payments account if clubs, communities, hospitals, educational institutions, lawyers, etc. is the best example of a cash system.

Single Entry System

This system ignores the double aspect of each transaction considered in human entry system. A single entry system, just personal factors ie business personal accounts are listed. This method does not take account of the impersonal aspects of business in cash. It does not check the accuracy of the position and no safeguard against fraud because it does not provide a check of the recording of cash. That is why it is called the “imperfect accounting.”

Double Entry System

The double entry system was first developed by Luca Pacioliin, who was a Franciscan monk in Italy. Over time, the system has gone through a lot of developmental stages. It is the only method meet all objectives systematic accounting. It recognizes the double aspect of any business.

These questions are critical to a trader and answers can only be made up to date financial data. Only systems keep a complete record of all transactions will help the owner to know the amount he has gained or lost.

main goal of any business is to earn maximum possible profits with minimal cost. In view of this, commercial organization always tries to expand its business, increase their sales and reduce operating costs. The progress in this respect, is always meant only by properly maintained financial records.

Meaning Accounting

In the beginning, the main objective of accounting was to verify the results of operations (whether profits have been earned or loss has been suffered) a year to show the company’s financial condition as of a specific date. Accounting has to meet the requirements of tax authorities; Investors regulations; management and owners. This has resulted in widening the scope of accounting and may be defined as follows:

“Accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of money transactions and events that are part at least, of financial nature and interpret their results. “

Is Accounting science or art?

In simple words, science confirms the relationship of cause and effect, but art is the application of knowledge consisting of several accepted theories, principles and rules. Since accounting docs not establish a causal link it provides us only with the method of accounting objectives can be achieved by accounting is an art and not a science. Accounting is the art of taking finances a group of books; categories of the relevant classes and made presentations in a suitable manner to affected individuals in their favor.

Scope Accounting

The need of accounting system was of a man in the early trade and commerce. The art of the books is as old as the art of the business itself. The art of keeping records through many stages since its inception. With business development, it has achieved the status of great importance. One could truly say that accounting has become the foundation upon which all the ingredients of modem commerce rests.

Although there is no legal obligation on ordinary traders to keep records, every business house finds it necessary and convenient to keep systematic records to know exactly where it stands. Moreover, it is legally binding for some types of companies, such as limited liability companies, to prepare regular, statements in the proper form showing the position of the company. A proper and satisfactory method of accounting is an important part of the business houses for the following reasons:

(1) If no records are kept, it will be difficult to find out the exact profit. In such circumstances, the tax authorities may overestimate the profits and so traders will suffer for not having kept business records.

(2) In the absence of proper business records, traders will find it difficult to make a true position to the court if it becomes insolvent.

(3) Keeping proper records helps traders in framing future programs and policies.

(4) It will be difficult to ascertain and fix the price of the transaction to sell or dispose off, if no records are kept.

(5) Finally, despite the best memory that is beyond the capacity of traders to remember all transactions with back references.