Accountancy:
Accountancy refers to a systematic knowledge
of accounting. It explains ‘why to do’
and ‘how to do’ of various aspects of accounting. It tells us why and how
to prepare the books of accounts and how to summarize the accounting
information and communicate it to the interested parties.
Book keeping:
Book- keeping includes recording of journal, posting in ledgers
and balancing of accounts. All the records before the preparation of trail
balance is the whole subject matter of book- keeping. Thus, book- keeping many
be defined as the science and art of recording transactions in money or money’s
worth so accurately and systematically, in a certain set of books, regularly
that the true state of businessman’s affairs can be correctly ascertained. Here
it is important to note that only those transactions related to business are
recorded which can be expressed in terms of money.
Book- keeping is the
science and art of correctly recording in books of account all those business
transactions that result in the transfer of money or money’s worth”. R.N.Carter
Objectives
of Book- keeping:
i)
Book- keeping provides a permanent record of each transaction.
ii)
Soundness of a firm can be assessed from the records of assets and abilities on
a particular date.
iii)
Entries related to incomes and expenditures of a concern facilitate to know the
profit and loss for a given period.
iv)
It enables to prepare a list of customers and suppliers to ascertain the amount
to be received or paid.
v)
It is a method gives opportunities to review the business policies in the light
of the past records.
vi) Amendment of business laws, provision of
licenses, assessment of taxes etc., are based on records.
Accounting:
American Institute of Certified Public Accountants (AICPA) which
defines accounting 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 results
thereof”.
Objective of Accounting
Objective of accounting may differ from business to business
depending upon their specific requirements. However, the following are the
general objectives of accounting.
i) To keeping systematic record: It
is very difficult to remember all the business transactions that take place.
Accounting serves this purpose of record keeping by promptly recording all the
business transactions in the books of account.
ii) To ascertain the results of the operation: Accounting helps in ascertaining result i.e., profit earned or loss
suffered in business during a particular period.
iii) To ascertain the financial position of the business: In addition to profit, a businessman must know his financial
position i.e., availability of cash, position of assets and liabilities etc.
This helps the businessman to know his financial strength. Financial statements
are barometers of health of a business entity.
iv) To portray the liquidity position: Financial reporting should provide information about how an
enterprise obtains and spends cash, about its borrowing and repayment of
borrowing, about its capital transactions, cash dividends and other distributions
of resources by the enterprise to owners and about other factors that may affect
an enterprise’s liquidity and solvency.
v) To protect business properties: Accounting
provides upto date information about the various assets that the firm possesses
and the liabilities the firm owes, so that nobody can claim a payment which is
not due to him.
Methods of Accounting
Business transactions are recorded in two different ways.
* Single Entry
*Double Entry
Single Entry: It is
incomplete system of recording business transactions. The business organization
maintains only cash book and personal accounts of debtors and creditors. So the
complete recording of transactions cannot be made and trail balance cannot be
prepared.
Double Entry: In this system
every business transaction is having a twofold effect of benefits giving and
benefits receiving aspects. The recording is made on the basis of both these
aspects. Double Entry is an accounting system that records the effects of
transactions and other events in at least two accounts with equal debits and
credits.
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