What is Accounting ?

What is Accounting ?

Financial accounting is the language of business accounting is to record all the details of any business the man purpose of accounting is to give financial information that is useful for the decision making purposes whether the decision is made by owners, management, credited, government, partners or any other person that have an interest in the financial performance of the business.

Definition :

Accounting is the process of recording financial information of any business and then to communicate this information to the concerned persons (owner, manager, partners, investors, tax etc.) 

THE WORK OF BUISNESS STARTS WITH TRANSACTION.

What Are Transaction ?  

Transaction are activities with change the financial position of the business.

Transaction is any dealing between two persons regarding the things e.g you go to the bookshop and pay cash to buy a book this dealing between you and the owner of the book shop is transaction it is business dealing between you and the book seller.

There Are Two Types of Transaction :

Cash transactions - transactions which involve cash or cash transactions any purchase made for cash or any sale made for cash is cash transactions e.g cash paid for office rent, cash paid for purchase of office table , cash for salary of an employee, cash for any expense, cash received from the cell of asset etc.

Credit Transaction - transaction which do not involve cash or credit transactions (i.e ammount payable in future are receivable in future ) ,e.g . If someone can changes office furniture without paying cash at that and is to pay cash in future, this transaction is credit transaction. 

important Accounting Terms :

1. Proprietor/ Owner : the person who initiative to start the business he invest his money and bears all the risk of the business is called owner.

2. Capital : It is the amount invested by the owner into the business it may be in cash or in kind capital is increased which the amount of profits and decreased with the amount of losses and drawings. 

3. Drawings : it is the amount or benefit withdrawn by owner from the business for personal or domestic use it may be in the form of cash goods or assets.

4.Inventory/ Stock : The good left unsold at the end of the accounting period is called closing stock the stock may be of raw material, work in progress or finished goods.

5. Debtor : the person from whom amount is due for goods sold or services rendered is called debtor.

6. Creditor : the person to whom ammount is owed by enterprise all account of goods purchased is called creditors.

7. Debit and credit : in the account books left hand side of any account is called David side and right hand side is called the credit side debit is ebbreviated as Dr .& Credit is ebbreviated as Cr.

8. Assets : the things business boy for the purpose to profit in future these have some monetary value and could be tangible or intangible,e.g. debotors, furniture, building etc.