Basic concepts of Accounting
Accounting is the organized and widespread process of keeping records of financial deals connected to a business and it is also called as the process of measuring, reviewing, and informing these dealings to supervising agencies and tax collection objects. Accounting is one of the most important components for almost any business; it may be managed by an accountant and Auditor at generous finance departments with dozens of workers at large companies or by small firms.
Accounting helps in decision making by showing where and when money has been spent by checking performance and by showing the implications of choosing one plan instead by another. In all business which needs money and other economic resources, accounting is required to account for these resources.
Accounting as an information system is the process of measuring, identifying and communicating the economic information of an organization to its users who need the information for decision making. Accounting is known as the language of business.
Branches of Accounting: –
From past few years, Accounting has expanded into various types and it is a massive and vital profession and varying need of its users. The branches of Accounting are as stated follows:-
- Financial accounting:
- Management accounting
- Government accounting
- Tax accounting
- Forensic accounting
- Project accounting
Types of Accounting: –
- Cash Based Accounting: – Most of us use the cash method to keep track of our personal financial activities. The cash method recognizes revenues when payment is received and recognizes expenses when cash is paid out.
- Accrual Accounting: – the accrual method relies on the method of matching revenues and expenses. The accrual method of accounting requires that the revenue is recognized and assigned to the accounting period in which it is earned. Similarly, expenses must be assigned and distinguish to the accounting period in which they are incurred. The company keeps the summary of the accounting activity in time intervals called Accounting period.
Overall, the accounting agencies can find out the efficiency of a business, and increase profit by handling the record.