Meaning of Accounting
Accounting is the process of analyzing, classifying, summarizing, interpreting, and communicating the records of financial transactions. It helps to find out the profit and loss and financial position of the business in a particular year. It also gives the financial information of the business.
Objectives of accounting
a. To maintain records of the financial transaction according to the specified rule.
b. To determine profit & loss made by the business.
c. To ascertain the financial position of the business by preparing a balance sheet
d. To provide information to the various parties such as manager, owner, creditors, government to the business. If personal transactions of the owner are mixed up, the business can’t get the actual result so that transactions of the owner and business should be separate.
Different concepts of accounting
1. Money measurement concept: t S a next important concept of accounting. In this concept, there is recorded only those transactions which can be expressed or converted into monetary value. Non-financial transactions like emotion, feelings, thoughts are not recorded because they can’t be expressed in terms of money.
2. Going concept: In this concept, Business will continue forever All business concern never thinks that it will be closed after some period. Business is also an artificial person and never dies like natural persons and it has an unlimited life.
3. Cost Concept: In this Concept, all business transactions should be recorded in the book of account at the cost price that it is purchased and not anymore or less.
4. Accounting period concepts: In this concept, a business organization keeps and closes the books with a fixed period to find out the profit & loss. Therefore, the record of a period is known as the accounting period. Generally, it may be started from January or Baisakh or Shrawan and ended in December or Chaitra or Ashadh.
5. Matching concept: In this concept, the expenses & incomes relating to a certain period should be matched to determine the correct profit. Any income or expenses or the last year and coming year shouldn’t include in the current year
6. Realization concept: In this concept, revenue is realized when goods & services are transferred to the customer either for cash in the future. Forecast sales aren’t recorded in the book of account and advance incomes aren’t also recorded.