Posted in Finance, Accounting and Economics Terms, Total Reads: 3371
Accounting refers to the practice of systematically recording the financial transactions of a business, analysing the information for internal development by the management, summarizing and interpreting them for the sake of reporting to the concerned state authorities and the stakeholders of the firm. It includes-
1. Financial Accounting- Provides financial statements based on generally accepted accounting principles (GAAP) and the focus is on reporting to external parties
2. Management/Cost Accounting- Mainly used by management for identifying the overheads, keeping track of the goals and solving the problems
Financial information is mainly summarized by-
a) Balance Sheet- Gives the value and nature of a firm’s assets, liabilities and owners’ equity by describing the source of funds and the application of funds as on a given date.
b) Income Statement- Profit/Loss for a given time period by including both cash and non-cash transactions.
c) Cash Flow statement- Assesses the liquidity of the firm by estimating the net cash flow for a given time period
Accounting, being one of the key divisions of any business is managed by bookkeepers and qualified accountants with designations such as Chartered Accountant (India) / Certified Public Accountant (USA)