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Terms & Definition of Accounting

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Terms & Definition of Accounting
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Soyab Shaikh
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Terms & Definition of Accounting - August 1st, 2013

Accounting, is the production of financial records about an organization. Accountancy generally produces financial statements that show in money terms the economic resources under the control of management; selecting information that is relevant and representing it faithfully. The principles of accountancy are applied to accounting, bookkeeping, and auditingAccounting refers to the practice of systematically recording the financial transactions of a business, analysing the information for internal development by the management, summarizing and interpreting them for the sake of reporting to the concerned state authorities and the stakeholders of the firm. It includes-

1. Financial Accounting- Provides financial statements based on generally accepted accounting principles (GAAP) and the focus is on reporting to external parties. Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.The fundamental need for financial accounting is to reduce principal–agent problem by measuring and monitoring agents' performance and reporting the results to interested users.

Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day-to-day running of the company. Management accounting provides accounting information to help managers make decisions to manage the business.
In short, financial accounting is the process of summarizing financial data taken from an organization's accounting records and publishing in the form of annual (or more frequent) reports for the benefit of people outside the organization.Financial accountancy is governed by both local and international accounting standards


2. Management/Cost Accounting- Mainly used by management for identifying the overheads, keeping track of the goals and solving the problems. Cost accounting is a process of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
Since managers are making decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations. Instead, information must be relevant for a particular environment. Cost accounting information is commonly used in financial accounting information, but first we are concentrating on its use by managers to make decisions.

Financial information is mainly summarized by-

a) Balance Sheet- Gives the value and nature of a firm’s assets, liabilities and owners’ equity by describing the source of funds and the application of funds as on a given date.
b) Income Statement- Profit/Loss for a given time period by including both cash and non-cash transactions.
c) Cash Flow statement- Assesses the liquidity of the firm by estimating the net cash flow for a given time period
Accounting, being one of the key divisions of any business is managed by bookkeepers and qualified accountants with designations such as Chartered Accountant (India) / Certified Public Accountant (USA)
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Jitendra Mazee
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Re: Terms & Definition of Accounting - April 17th, 2016

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Originally Posted by soyab.reloaded View Post
Accounting, is the production of financial records about an organization. Accountancy generally produces financial statements that show in money terms the economic resources under the control of management; selecting information that is relevant and representing it faithfully. The principles of accountancy are applied to accounting, bookkeeping, and auditingAccounting refers to the practice of systematically recording the financial transactions of a business, analysing the information for internal development by the management, summarizing and interpreting them for the sake of reporting to the concerned state authorities and the stakeholders of the firm. It includes-

1. Financial Accounting- Provides financial statements based on generally accepted accounting principles (GAAP) and the focus is on reporting to external parties. Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.The fundamental need for financial accounting is to reduce principal–agent problem by measuring and monitoring agents' performance and reporting the results to interested users.

Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day-to-day running of the company. Management accounting provides accounting information to help managers make decisions to manage the business.
In short, financial accounting is the process of summarizing financial data taken from an organization's accounting records and publishing in the form of annual (or more frequent) reports for the benefit of people outside the organization.Financial accountancy is governed by both local and international accounting standards


2. Management/Cost Accounting- Mainly used by management for identifying the overheads, keeping track of the goals and solving the problems. Cost accounting is a process of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
Since managers are making decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations. Instead, information must be relevant for a particular environment. Cost accounting information is commonly used in financial accounting information, but first we are concentrating on its use by managers to make decisions.

Financial information is mainly summarized by-

a) Balance Sheet- Gives the value and nature of a firm’s assets, liabilities and owners’ equity by describing the source of funds and the application of funds as on a given date.
b) Income Statement- Profit/Loss for a given time period by including both cash and non-cash transactions.
c) Cash Flow statement- Assesses the liquidity of the firm by estimating the net cash flow for a given time period
Accounting, being one of the key divisions of any business is managed by bookkeepers and qualified accountants with designations such as Chartered Accountant (India) / Certified Public Accountant (USA)
Hey friend, thanks for sharing such a nice information related to accounting and its related terms and i am sure it would help many accounting students. Well, i have also got some important information and would like to share it with you.
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