Accounting is a process of identifying, recording, classifying and reporting information on financial transactions in a systematic manner for the purpose of providing financial information for decision making. Basically, accounting is finance support system that:
- Records transactions
- Classifies transactions and events
- Expresses transaction in monetary terms
- Helps to monitor the financial performance and condition of the business
- Helps to evaluate the business helps to establish controls for the business
Is accounting science or an art?
- Accounting is both science and an art.
- Science may be defined as a systematized body of knowledge based on certain principles, which have universal application.
- Art, on the other hand, is the application of knowledge comprising of some accepted theories, principles, rules, concepts and conventions. It helps us to achieve our goals and tell us the manner in which we may attain our objectives in the best possible way. The more we practice an art the more expert we become in it.
- Accounting is a science because recording, classifying and summarizing of business transactions is done on the basis of certain principles such as principles of Double Entry System, which are universally applicable.
- Accounting is based on certain concepts and conventions and is subject to some limitation. It is influenced by bias and personal judgment of the accountant. The more a person does account, the more proficient he becomes in it. To this extent, accounting is still an art.
How many branches of accounting?
| Financial Accounting | 1. This is the original form of accounting and has been in use since the beginning. 2. It includes Book keeping and Accountancy and is mainly related to recording and preparation of financial statements. |
| Management Accounting | 1. It is that area of accounting, which assists the management in efficient and successful operation of the organization concerned. 2. It is concerned with analysis, interpretation of financial accounting to derive meaning full conclusions for future growth. 3. There are number of tools/techniques for the purpose like ratio analysis, fund flow & cash flow statement analysis, comparative statements etc. |
| Cost Accounting | 1. It deals with the estimation, recording, allocation and control of cost. 2. It is followed by manufacturing concerns. The object is to: – 3. Compute the cost of product being manufactured. 4. Curb the cost though application of cost control techniques. |