What is accountin

As per American Institute of Certified Public Accounts, AICPA, Accounting is an art of recording, classifying and summarising in a significant manner and in terms of

money, transactions and events which are in part at least, of a financial character and interpreting the results there of.

Main objective of accounting is mentioned below

a. Account of all economic transactions: All the transaction of a firm is recorded in accounting, either it purchases, credit, sales or anything else financial, it will be recorded in accounting.

b. Profit and loss statement: To access the financial position of a company, different statement like profit and loss statement, balance sheet etc are prepared in accounting.

c. To know the financial position of a company: By analysing the statement prepared using accounting, interpretation of these statement can provide information about financial position of a company on different parameters for different companies.

d. To have effective control over business: Financial statement provides information that on which parameters company is doing good and bad, like some expenses may be higher than usual, which should not be higher, when this information is available, management can have control over them.

e. To provide information to all interested parties : Different stakeholder have different interest in company, like a investor may want to know about future profit of company, so lender may be interested in having information that whether company will be able to pay loan or not, this information can be accessed by statement prepared by accounts.

f. For preparation of tax information: At the end of year company needs to pay taxes to government and how much tax needs to be paid, calculated by accounting.

g. Provide required information to financial institutions: Companies need to furnish certain information to financial institutes, like SEBI, or Minister of corporate affair and this information is provided by statements prepared using accosting methods.