Accounting is the process of methodically recording, measuring and communicating information about financial transactions. The three major financial statements of accounting are the profit and loss statement, the balance sheet and the cash flow statement that is prepared in the end of financial year.
It is a process that keeps records about the financial aspect. In other words, we can say that accounting is a process that keeps information about the money providing interaction in any organization or business.
It is made up of two words article and notation. The article means write and the marking means in figures, the process where any event sequence is kept in writing is called accounting (monitoring). Event sequence means exchange of money.
Just like in any big organization, in business, in shops or even in small shops, there is a lot of buying and selling, that means there is a sale and purchase and it is very difficult to remember that, so we keep a record of buying and selling When we keep it in writing in our diary or in the computer, it is called accounting.
Types of Accounting
There are three types of accounting which are as follows: –
- Personal Account
- Real Account
- Nominal Account
Personal Account is that account which belongs to any person, any company or any organization. In other words, the account that is associated with any person, organization, company is called Personal Account. Examples- Ram account, Bank account, Capital account, drawing account etc
Real account is that account which is related to the object or property. In the term of accounting, then the account which is related to assets (goods and services) and liabilities (debt or debt) is called real account.
Examples- Land account, Building account, Machinery account, Furniture account, Cash Account etc.
A nominal account is called an account in which income and expenses are written. In other words, an account that keeps information related to profit or loss or related to profit and loss is called a nominal account.
Examples- Salary Account, Interest Account, Discount Account, Wages Account, Sales Accounts etc.
Scope of Accounting
Accounting plays an important role in facilitating all types of economics activity in the private, public and non-profit sectors.
All the professional persons adopt some suitable types of accounting methods for maintain accounting in profession.
It spread in all society and all professions
It is helpful for us to estimate our profit and loss in all professions.
Accounting is essential for all types of business organizations, even for individuals and families.
Advantage of Accounting
The first advantage is that we keep in mind about the money of the transaction, how much money has been given to the people or from whom, how much money is received, we get accurate information about all these things through accounting.
When we keep any record in writing, we do not have to remember our transaction process again and again.
We can easily find the accurate profit or loss estimate in our business through accounting.
Through this, we can also find out how much capital has been invested in our business that means how much money is still available or available in our business.
Accounting helps in keep all the record of business transaction.
Accounting helps in take a good decision in Business development.
Accounting helps in Prepare the all Financial Statements.
In last we can say that the accounting is very necessary in all the fields because it helps in maintain the all Systematic records, preparation of Financial statements, Decision Making, Comparison of results, Facilities audits and effective Management.