Today we talk about Meaning & Definition of Scope and Process of Accounting in this post. Meaning of Accounting: The systematic recording, analysis and reporting of financial transactions of a business.
The person who is in-charge of accounting is known as an accountant. Collection of financial data and recording thereof in a systematic, informative and purposeful manner so as to obtain any needed information in your business. There are lot of difference between booking and accounting, some difference are given below.
1. Book-Keeping is the recording phase while accounting is the summarizing phase.
2. Book-Keeping work is end, while accounting work is begin when book keeping work is end.
3. Book-Keeping maintain only your accounts while accounting not only maintain accounts but also prepare final accounts of your company.
Scope of Accounting:
- In transactions money is must.
- Financial positions of parties must be changed.
- Each and every transactions affected both side.
Purpose of Accounting:
- Maintenance of records of business transaction
- Calculation of profit and loss
- Providing to accounting information to its user
- Analysis the financial position of the business
- Recording/ Journalizing
- Classifying/ Ledger Posting
- Calculating/ Ledger Balancing
- Summarizing/Preparation of trial Balance
- Reporting/Preparation of final account
Different between Event & Transaction:
Event: – Event does not affect the financial situation of the company. It can be expressed in monetary terms or not. Eg. Placing of order, Appointment any accountant etc.
Transaction: – It must be expressed in monetary terms. It brings change in the financial position of a business. Eg. Purchase of goods, Payment of salary etc.
|Event V/s Transaction|
|Mr. Vimal Started business with cash of Rs. 100000||Transaction|
|Paid Salary to staff Rs. 10000||Transaction|
|Place an order to Shubham Ltd. for buying
|Appoint Mr. Vikas as a Cashier of Rs. 12000||Event|
|Received interest from bank of Rs. 3000||Transaction|
|Opened a bank account by depositing Rs. 5000/-||Transaction|
|Give gift to a supplier in the business car.||Event|
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