MEANING OF ACCOUNTING Accounting is an art of recording ,classifying and summarising in a significant manner and in terms of money ,transactions and

events ,which are ,in part atleast, of a financial charater ,and interpreting the results thereof. Characteristics of Accounting :(1) Recording of Financial Transections only (2) Recording (3) Classifying (4) Summarising (5) Recording in terms of Money (6) Interpretation of the results Objectives or Functions of Accounting :(1) To keep systematic record of business transtions (2) To calculate profit or loss (3) To know the exect reasons leading to net profit or loss (4) To ascertain the financial position of the business (5) To ascertain the progress of the business from year to year (6) To prevent and detect errors and frauds (7) To provide informations to various parties <Distinction between (1) Book Keeping, (2) Accounting and (3) Accountancy> (1) Book Keeping :- it is mainly concerned with record keeping or maintenance of books of accounts . (2) Accounting :- it starts where booking keeping ends .it includes the following activites : (i) Summarising the classified transactions in the form of profit or loss Account and Balance Sheet etc .

(ii) Analysing and interpreting the summerised results .In other words ,drawings the meaningful information from profit or loss Accounts and Balance Sheet etc. (iii) Communicating the information to the interested parties. (3) Accountancy :- it refers to a systematic knowledge of accounting concerned with the principles and techniques which are applied in accounting .It tells us how to prepare the books of accounts,how to summarize the accounting information and how to communicate it to the interested parties. Process of Accounting OR Accounting Cycles

Types or Sub-fields of Accounting :(1) Financial Accounting (2) Cost Accounting (3) Management Accounting (4) Tax Accounting (5) Social Responsibilities Accounting

USERS OF ACCOUNTING INFORMATION &THEIR NEEDS OR PARTIES INTERESTED IN ACCOUNTING INFORMATION Accounting information is used by various groups of people who have contact with the enterprise.They use accounting information in orders to satisfy some of their varied needs for information. These ursers may be classified as :(i) Internal users internal users are the persons who are directly involved in managing and operating the business enterprise such as directors or the partners, managers and officers .These persons need are accounting information for the efficient and smooth running of the business enterprise . (ii) External users Individuals or organizations who have present or future interest in the business enterprise but are not part of the management are called external users of accounting information.The external users are given below :(1) Owners (2) Potential investors (3) Creditors (4) Lenders (5) Employees (6) Government (7) Researchers (8) Public Advantages or Uses of Accounting
(1)

Helpful in management of business :-Management needs a lot of information for the efficient running of the business.All such information is provided by the accounting which helps the management in the following :-

(i) Helpful in Planning (ii) Helpful in Decision Making (iii) Helpful in Controlling (2) (3) (4) (5) Provides Complete and Systematic Record Information Regarding Profit or Loss Information Regarding Financial Position Enables Comparative Study (6) Helpful in Assessment of Tax Liability (7) Evidence in Legal Matters (8) Facilitates Sale of Business (9) Helpful in Raising Loans (10) Helpful in Prevention and Detection of Errors and Frauds. Limitations of Accounting (1) (2) (3) (4) (5) (6)
(7)

Influenced by personal Judgements Based on accounting Concepts and Conventions Incomplete Information Omission of Qualitative Informations Based on Historical Costs Affected by Window Dressing Unsuitable for Forecasting Role of Accounting

(1) (2) (3) (4) (5)

Role of a Language Role of Historical Record Role of Determining the Net Profit Role of Information System Role of Servise Provider ******