What is Accounting
Accounting affects every single person in the society as much as it affects large businesses and organizations. Everyone uses accounting ideas when they spend money on summer trip or purchase books from Amazon. For individuals it is not possible to record what they are spending, businesses must record properly each and every transaction incurred.
Recording Accounting Data
When it comes to accounting, people consider it as used by business and organizations. Businesses and organizations cannot keep and handle the accounting activities and data in their mind and thus must record it in a proper way.
Classifying and Summarizing Accounting Data
First the data is recorded in a proper manner, must be organized so as to be most useful to the business. Doing such classifying and summarizing of accounting records, it will become easy to workout profit or loss has been made by the business in a particular period of time. Business can also find the resources are owned and what is owed by it in a particular period of time.
Communicating Accounting Information
By recording and classifying accounting data, those have skilled in the accounting should be able to tell whether business is performing well or not and what are the strengths and weaknesses of the business. Finally they will be able to communication and share information with the business owners and other stakeholders.
Therefore, accounting is
- Recording of data
- Classifying and summarizing of data
- Communicating accounting information
Users of Accounting Information
Users Following may be possible users of accounting information
Business owners: Owners want to be in picture whether their business is profitable or not and what financial resources they have.
A Prospective Buyer: If the owner is interested to sell the business the buyers must have the due rights to access the all financial information.
Financial Institutions: When the businesses are in need to borrow money they must share concern financial information to banks and financial institutions
Governmental Agencies: Different Government Agencies like Tax Department need financial information to calculate the taxes.
Both Internal users those inside the business and External users those outside the business have interest in financial information of a business. One thing is certain, without proper recording accounting data it will be difficult to communicate the information prospective users and stakeholders.