Definition Scope and Process of Accounting

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:

  1. In transactions money is must.
  2. Financial positions of parties must be changed.
  3. Each and every transactions affected both side.

Must Read: Tally-Creation Process of Single | Multiple Ledger Accounts

Purpose of Accounting:

  1. Maintenance of records of business transaction
  2. Calculation of profit and loss
  3. Providing to accounting information to its user
  4. Analysis the financial position of the business

 Accounting Process:

  1. Recording/ Journalizing
  2. Classifying/ Ledger Posting
  3. Calculating/ Ledger Balancing
  4. Summarizing/Preparation of trial Balance
  5. Reporting/Preparation  of final account

Must Read: Tally Groups Creation Process Single | Multiple Groups

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. 100000Transaction
Paid Salary to staff Rs. 10000Transaction
Place an order to Shubham Ltd. for buying
computer tables
Appoint Mr. Vikas as a Cashier of Rs. 12000Event
Received interest from bank of Rs. 3000Transaction
Opened a bank account by depositing Rs. 5000/-Transaction
Give gift to a supplier in the business car.Event

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