Introduction to Accounting
According to American Institute of Certified Public Accountants (AICPA-
1941), “Accounting is 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.”
Functions
1. Recording: This is the recording of business transaction of financial character
in an orderly manner. This is done in the books called journal.
2. Classifying: Systematic analysis of the recorded data and bringing together
items of the similar nature at one place. This work is done in the book called
ledger.
3. Summarizing: Presenting of the classified data in a way which is
understandable and useful to the internal as well as external users. This leads
to the preparation of Trial balance, Income statement and Balance sheet.
4. Deals with financial Transaction: It records transactions and events, in
terms of money which are of a financial character.
5. Analyses and interprets: The recorded financial data are analyzed and
interpreted in such a way to make a meaningful judgment about the financial
position and operational result of business by end users.
6. Communicates: Communication is done through preparation of accounting
reports such as accounting ratios, graphs, diagrams, fund flow statement etc.
Types of Accounting
1. Financial Accounting
It is the original form of accounting. The object of financial accounting is to
provide information about the financial position of the business. Financial
accounting information expressed in monetary terms.
2. Management Accounting
According to American Institute of Certified Public Accountants (AICPA-
1941), “Accounting is 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.”
Functions
1. Recording: This is the recording of business transaction of financial character
in an orderly manner. This is done in the books called journal.
2. Classifying: Systematic analysis of the recorded data and bringing together
items of the similar nature at one place. This work is done in the book called
ledger.
3. Summarizing: Presenting of the classified data in a way which is
understandable and useful to the internal as well as external users. This leads
to the preparation of Trial balance, Income statement and Balance sheet.
4. Deals with financial Transaction: It records transactions and events, in
terms of money which are of a financial character.
5. Analyses and interprets: The recorded financial data are analyzed and
interpreted in such a way to make a meaningful judgment about the financial
position and operational result of business by end users.
6. Communicates: Communication is done through preparation of accounting
reports such as accounting ratios, graphs, diagrams, fund flow statement etc.
Types of Accounting
1. Financial Accounting
It is the original form of accounting. The object of financial accounting is to
provide information about the financial position of the business. Financial
accounting information expressed in monetary terms.
2. Management Accounting
