Purpose, Characteristics and Advantages of Accounting

Purpose of Accounting The primary purpose of accounting is to provide information that is useful for decision-making Accounting provides reliable information about the sources and trends of revenues within an enterprise Accounting provides authenticated information about the economic resources and obligations of a business Accounting provides reliable information about changes in the financial and…

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Functions and Limitations of Accounting

Functions of Accounting The functions of accounting are: Managing Resources The first function of accounting is to manage the resources held by specific entities. Reflection of Claims Its purpose is to reflect the claims on the business. Measurement of Changes Its purpose is also to measure the level of changes in the claims against the business. Division of Specific Periods Another purpose of acc…

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Difference Between Bookkeeping and Accounting

If your knowledge of accounting is slim, you might be confused about the differences between bookkeeping and accounting. Bookkeeping is a small part of accounting. It represents only the recording phase of an accounting system. Therefore, we can say that the process of accounting begins where the process of bookkeeping ends. Accounting not only includes maintaining accounting records but also the…

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Bookkeeping

Bookkeeping: Definition Bookkeeping is the art of recording business transactions in a systematic manner. However, bookkeeping has been defined in various ways by different authors. Some of the major definitions are given below: Bookkeeping is an activity concerned with recording financial data related to business operations in a significant and orderly manner The part of accounting that is concer…

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Accounting

Accounting: Definition The American Institute of Certified Public Accountants (AICPA) published perhaps the most comprehensive definition of accounting: 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 results thereof. Accounting: Expla…

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Accounting Cycle

The sequence of accounting procedures is frequently referred to as the accounting cycle or the phases of accounting. It is repeated in the same order in each accounting period. The accounting cycle begins with the journalizing of transactions and ends with the post-closing trial balance. The most significant output of the accounting cycle is the income statement and balance sheet. Phases of Accoun…

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Branches or Types of Accounting

The present age is the age of competition. There is a struggle for existence in every area of life, including in the field of business, which consists of trade, commerce, industry, and direct services. It is necessary for every business to carry on its activities with the greatest possible level of efficiency so as to ensure the optimal utilization of the limited resources at its disposal. Account…

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Objectives and Advantages of Accounting

Objectives of Accounting The main objective of maintaining a set of accounting books is to enable the business owner to receive information about the financial position and conduct of their business as and when they need it. Every business person makes financial transactions in the course of running their business. It is virtually impossible for them to remember each and every detail of all these…

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Difference Between Financial and Management Accounting

Accounting is often divided into two categories: financial accounting and management accounting. Financial Accounting Financial accounting information is designed primarily for use by persons outside the firm, including creditors, stockholders, owners, governmental agencies, and the general public. Most companies publish financial accounting data through a set of general-purpose statements known a…

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Users of Accounting Information

A large number of people, entities, and stakeholders have an interest in the financial well-being of businesses. A list is given below of some of the users of the information provided by accounting.  These users can be categorized under external and internal users. This is shown in the diagram below. Internal Users of Accounting Information 1. Owners Owners are the people who provide capital for t…

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