MEANING AND SCOPE OF ACCOUNTINGAccounting is the language of business. The main objectives of Accounting is to safeguard the interests of the business, its proprietors and others connected with the business transactions.
DEFINITION OF ACCOUNTINGAccording to AICPA (American Institute of Certified Public Accountants) it is defined as "the art of recording, classifying and summarizing 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 result thereof.“The American Accounting Association defines accounting as "the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of the information."
STEPS OF ACCOUNTINGThe following are the important steps to be adopted in the accounting process:Recording: Recording all the transactions in subsidiary books for purpose of future record or reference. It is referred to as "Journal."Classifying: All recorded transactions in subsidiary books are classified and posted to the main book of accounts. It is known as "Ledger.“Summarizing: All recorded transactions in main books will be summarized for the preparation of Trail Balance, Profit and Loss Account and Balance Sheet.Interpreting: Interpreting refers to the explanation of the meaning and significance of the result of final accounts and balance sheet so that parties concerned with business can determine the future earnings, ability to pay interest, liquidity and profitability of a sound dividend policy.
FUNCTIONS OF ACCOUNTINGFrom the definition and analysis of the above the main functions of accounting can be summarized as:i.Keeping systematic record of business transactions.ii.Protecting properties of the business.iii.Communicating the results to various parties interested in or connected with the business.iv.Meeting legal requirements
OBJECTIVES OF ACCOUNTINGProviding suitable information with an aim of safeguarding the interest of the business and its proprietors and others connected with it.To emphasis on the ascertainment and exhibition of profits earned or losses incurred in the business.To ascertain the financial position of the business as a whole.To ensure accounts are prepared according to some accepted accounting concepts and conventions.
BOOKKEEPING AND ACCOUNTINGBookkeepingmay be defined as "the art of recording the business transactions in the books of accounts in a systematic manner." A person who is responsible for and who maintains and keeps a record of the business transactions is known as Bookkeeper. His work is primarily clerical in nature.On the other hand, Accountingis primarily concerned with the recording, classifying, summarizing, interpreting the financial data and communicating the information disclosed by the accounting records to those persons interested in the accounting information relating to the business.