A.Explain nature and signisicance of accounting and also discuss various accounting concepts and convertions?
ANS.Some of the well established accounting bodies gives the various desinition of accounting.
ACCONTING TO AICPA IN 1991: Accounting is the art of recording,classifying and summarizing in significant manner and in terms of money,trasactions and events which are,in part, at least of financial character and interpreting the result therof.
Accounting to AAA in 1966:Accounting is the process of identifying,measuring and communcating economic information to permit informed judgements and decisions by users of the information.
Accounting to APB of the AICPA in 1970: The funtion of accounting is to provide quantitative information, premaily of financial nature,about econmic enteties,that is needed to be useful in making economic decision.
Thus, accounting may be defined as the process of recoding,classifying summarizng,analysing and interpreting the financial transaction and communicating the result these of to the person intrested in such information.now analyse the difinitcon brings out the term of defn:
- RECODING:This is the basic function of accounting,recoding is Done in the book journal.
- CLASSIFYING:clasification is concerned with the systematic analysis of the recoded data,with a view to group transactions or entries of one place. the work of classifications is done in the book termed as ledger.
- SUMMARIZING: This involves prsenting the classified data in a manner which is understandable and useful to the internal as well as external end-user of accounting statement. this process leads to the preparation of the following statements;(a)trial balance (b) income statement (c)balance sheet (d) dealing with financial transactions:acconting records only those transactions and events in terms of money which are of a financial charocter are not recoded in the books of account. (e) analysing and interpreting: The recoded financial data is analysed and in terpreted in a manner that the end-users can make a meaningful judgement about the financial condition and profitability of the business operations.(f) communicating: The acconting information after being meaningfully and interpreted has to be communicated in a proper form and manner to the proper person.
*NATURE OF ACCOUTING*
IT IS AN ART
- It is a science.
- It is an intellectual decipline.
- It is a proffesion.
- It is a social sorce.
- It is a service activity.
|*SIGNIFICANCE OF ACCOUNTING*|
- It provides records of transactions.
- It gives knowledge related to business decision.
- evidence in court.
- It help in taxation.
- It help in taking loan.
- It can compared to previous record of transaction.
- It help in knowledge about important transaction of business.
- It provides profit to employer.
- It help solvent.
- *GOLDEN RULE OF ACCOUNTING*
All the account have two rules each. One related to debit and one related to credit for recording the transactions which are termed as golden rule of accounting. as transactions are record on the basis of double entry system.
- Person account is governed by the following two rules: DEBIT THE RECEIVER, CREDIT THE GIVER.
- Beal account is governed by the following two rule: WHAT COMES IN DEBIT, WHAT GOES OUT CREDIT.
- Nominal account is governed by the following two rules: ALL EXPENSES AND LOSSES ARE DEBIT, ALL INCOMES AND GAINS ARE CREDIT.