What is Accounting Meaning? Accounting principles and concept

What is  Accounting Meaning?Accounting principles and concept

Accounting Meaning
When book keeping ends, then accounting begins. Accounting is the analysis and interpretation of book keeping records. It includes not only the maintenance of accounting records but also the preparation of financial and economics information which involves the measurement of transaction and other events relating to the entity. So, accounting is primarily concerned with designing the systems for recording, classifying and summarizing, the recorded data and interpreting them for internal, external and end users.
Thus, accounting refers to the actual process of preparing and presenting accounts. In other words, it is and art of keeping the academic knowledge into practice
It covers the following activities:
• Identifying the transactions and events.
• Measuring the identified transactions and events in a common measuring unit.
• Recording the identified and measured transactions in journal.
• Classifying the recorded transactions in ledger.
• Summarizing the classified transactions in the form of income statement.
• Analyzing the summarized results.
• Interpreting the analyzed results.
• Communicating the interpreted in formation to the interested parties.
Definitions
Accounting has been defined as follows:
American institute of certified public accountants accounting is defined as "the art of recording classifying and summarizing in terms of money transactions and events of financial character and interpreting the results there of."
R. LEWIS and LAN Gillespie "accounting may be seen as consisting of recording classification, presentation and interpretation of financial information."
Anthony R.N." accounting is a means of collecting summarizing, analyzing, and reporting in monetary terms, information about the business. "
Objectives of functions of accounting
The following are the main objective or functions of accounting"
1. To maintain the record of financial transaction: the objective of accounting is to identity financial transaction and them into appropriate book systematically and scientifically.
2. To calculate profit and loss: the second min objective of accounting is to ascertain the net profit earned or loss suffered on account of business transaction during the particular period. This is knows by preparing a trading and profit and loss account of the business at the each accounting periods.
3. To depict the financial position: merely ascertaining profit or loss is not sufficient for businessman. The businessman must also know the financial position of the business. To fulfill this objective a balance sheet is prepared which shows the assets and their values on the hand and the liabilities and the capital on the other. A balance sheet is actually a screen picture of the financial position of the business.
4. To determine the tax amount: it is another important objective of accounting to determine the tax mount with the help of providing without delay in accordance with the prevailing rules and regulation.
Scope of accounting
The scope of accounting is very wide, it can be described as follows:
1. Helps to trading concert: accounting is essentially importance to a trading concern for keeping the complete records of the transactions. It helps to determine the result of operations, Finance position, controlling assets and other resources establishing financial discipline assessing tax liabilities etc.
2. Helps to non-trading concern: non trading concerns are those concerns, which are established with service motive. They have to keep records to carry out their operation efficiently. For this purpose receipt and payment a/c, income and expenses a/c and balance shee

ts are prepared.
3. Helps to the professional and individual: accounting also helps to the professional like doctor, engineer, mechanics, lawyer, auditor etc. for recording expenses and earning income similarly, it helps to general people for making a proper balance of their income and expenditure for their personal and hold affairs.
4. Helps to the government: accounting helps to the government to evaluate the progress of the government project to collect necessary statements, data and information for the preparation of government budget to control over the leakage, misuse and misappropriation of budget etc. of the government properly.
Branch of accounting
Economics development and technological improvement have resulted in an increase in the scale of business operation, increasing the scale business operation and social awareness have made the management function more and more complex. These factors have given rise to specialize branch of accounting. They are:
1. Financial accounting: it is the process of identifying measuring recording classifying, summarizing analyzing interpreting and communication the financial transactions and events. The purpose of this branch of accounting is to keep systematic records to ascertain finance performance and financial position and to communicate the accounting information to the interested parties.
2. Cost accounting: it is the process of accounting and controlling the cost of a product, operation or function. The purpose of this branch of accounting is to ascertain the cost, to control the cost and to communication information for decision-making.
3. Management accounting: it is the application of accounting techniques for providing information designed to help all level of management to planning and controlling the activities of business enterprise and decision making. The purpose of the branch of accounting is to support any all information that management may need in taking decision and to evaluate the impact of its decisions and action.
4. Social responsibility accounting: it is the process of identifying measuring and communication the social effect of business decisions to permit informed judgment and decision by the users of information. It is accounting for social responsibility aspects of a business. Management is held responsible for what it contributes to the social well begins and progress. Accounting for environment and ecology is part of social responsibility accounting.
Accounting principles and concept

Accounting principles are broad rules adopted by the accounting profession as guides for use in recording and responding the affairs and activities of a business to its stockholders, investors, creditors and others outsiders. It is systematized body of knowledge having cause and effect relationship. The subject has certain established concepts, conventions, standard language and terminology to enable the interested parties in the subject to understand it in same sense as the accounting wants to communication. These accounting rules are usually called generally accepted accounting principle, rules of recording nd accepted accounting principles (GAAP), accounting assumptions, rules of recording and reporting business transactions are also known by terms like concepts, principles, conventions etc.
The American institute of certified public accounting (AICPA) has defined the accounting principles as "a general law, or rule adopted or professed as a guide a settled ground or basic of conduct or practices."
Basic concepts or assumption are the foundation of systems and power accounting. Every business must adopt these assumptions. The following are the main concepts and assumption:

1. Business entity concept: in accounts, the business is treated as separate and distinct from it owners. Distinction is maintained between the personal transaction of the proprietor (s) and these of the firm, for example, if a runs a cloth shop the wages that he pay to the helper working in the shop will be recorded in the firm's book but not the wages paint to his domestic servnt similarly purchase of cloth that will be a business transaction. His investment into and withdraw from the firm will all be recorded. This distinction is otherwise. The affairs of the firm and the proprietor's personal affairs will get mixed up and not clear picture will be available.
2. Going concern concepts: it is assumed that the business entity is a going concern that is it will continuous to operate for an indefinitely long period in the future. Since the assumption is that, the concern is going to last long, the flow of transaction is also assumed to be continues. As such the benefit from certain expenditure incurred in a particular years will occur to the business is a non stop process or a going concern, such heavy expenditure is to be spread over a long period in future. To fulfill this objective it is necessary to choose an accounting year appropriate portion of such deferred revenue expenditure is to be charged. To be that accounting period, this receives the benefit from such expenditure.
3. Money measurement concept: it is obvious that only those events and transactions as can be expressed in terms of money, at least partially, can be recorded in the book of account. For example, purchase of machinery, sale of old furniture, payment of wages and other expenses are all recorded in the book of account because this can be expressed in terms of money. But there may be some events which are very importance but cannot be expensed and measurement in terms and therefore are not recorded in the books of and the sales manager is not recorded in the books of account because its monetary effect cannot be measured with fair degree of accuracy. However, by and large, most event and transactions can be recorded in the books of account since a money value can be put on them.
4. Accounting period concept: the life of a business is assumed to be indefinite and the owners of the business cannot wait for such a long period for the determination of its profit or loss. Thus there is a need to know at frequent intervals how things are going. The accountants, therefore, choose some convenient segment of time, such as a year, for the accounting period can began on any day of year eg,. Form 1st jqn. To 31st dec. each year. Or from 1st april to 31st march of the next year etc.
5. Realization concept: this concept state that revenues are considered as earned on the data when it is realized. The revenue is realized by the amount charge for good sold or service endured to the customers. The revenue realized during an accounting period should only be included in income statement. For example, either goods sold for cash or credit to customers is taken as realizable income. But order received form a customer cannot be taken as realized income.
6. Cost concept: according to this concept, all the transactions and event of the business are to be recorded at the amount actually received or spent. This concept assumes that the fixed assets purchase must be recorded at their cost price and liabilities also must be recorded in the book o account at cost acquisition. The assets and liabilities carried from year to year at cost price. The charge of price in market does not effect to the business holding assets and liabilities.
7. Matching cost concept: accounting to this concept, cost of expenses of a business of a particular period are marched or compared with the revenue of the period in order to ascertain the net profit or net loss. In case the income earned is more than expenses, the result is net profit and if cost than income, the result is net loss.