The Basics of Accounting

Accounting is the scientific process of gathering financial data about financial transactions that involve physical assets and/or intangible assets, at a particular time. This science has various names like accounting principles, tax law, information systems, practice of accountants, and accountancy. This science utilizes many different techniques to collect, manage, analyze, and present financial data. Accounting involves the systematic recording, tracking, and reporting of financial transactions.

Accountants play a major role in the science of accounting. They create records of financial transactions for auditing purposes. In order to achieve goals in accounting, the role of the accountant is very important. As such, accountants are highly skilled people who can provide assistance to management to understand, manage, and improve their businesses’ financial performance. Some of the main activities involved in accounting include: creating financial reports, collecting information, analyzing the financial transactions, preparing the information for auditing, maintaining the information, applying rules in accounting, and defending the legal rights of clients and customers.

Generally, there are two major types of accounting practices. One is a manual accounting and the other is a computer-based accounting. Manual accounting involves the generation, maintenance, preparation, and submission of accounting reports. Manual accountant is based on the principles of journals, books, and ledgers. On the other hand, computer-based accounting is an information system that employs certain computer programs such as the Microsoft fiscal, the Peachtree Software, and the Quick Books. The main advantage of computer-based accounting practices is that they can generate accurate financial statements and reports.

All accounting transactions are recorded in books or ledgers. These records indicate the changes in the financial position through the passage of time. A bookkeeper records all financial information such as cash flows, sales, purchases, and net income or total profit. The accountant then creates and reviews the accounting records.

Every transaction in an account is called a transaction. The word ‘transaction’ in accounting means a series of related events or conditions which have a relationship to one another. There are many types of accounting transactions. These include: sales by the seller to the buyer, paying merchants, providing equipment, and so on.

Generally, accountants use different accounting software to manage their accounting records. The three types of accounting software are general ledger accounts, balance sheet, and journal. General-ledger accounts contains the information regarding the financial transactions made by the general ledger system. The balance sheet includes the balance sheet items such as assets, liabilities, revenue, and expenses. Journal is a special type of accounting, which presents the results of specific transactions recorded in the journals.

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