Meaning of Accounting
Accounting is the process of identifying, recording, classifying, summarizing, and interpreting financial transactions.
The Accounting Process
1. Identifying
Determining which business transactions are of a financial nature and should be recorded.
2. Recording
The systematic entry of identified financial transactions into the books of original entry (Journals).
3. Classifying
Grouping transactions of a similar nature into their respective ledger accounts (T-Accounts).
4. Summarizing
Presenting classified data in a condensed and useful manner, typically through Trial Balances and Financial Statements.
5. Interpreting
Analyzing and explaining the financial results to stakeholders to help them make informed decisions.
Primary Purpose
Why do we use accounting?
The ultimate goal of the accounting process is:
- To know Profit & Loss
- To know Financial Position
"ACCOUNTING IS NOT JUST A SUBJECT, IT IS THE LANGUAGE OF BUSINESS."