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
Event
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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