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Meaning of Accounting
In simple words, accounting can be defined as keeping records of all financial
transactions related to an individual or an entity. And then there are pre-defined rules
and procedures in the way a transaction should be accounted for. This is what we
call debit or credit, income or expenditure, asset or liability. There are then rules on
whether it would be an asset or an expenditure and so on.

Methods of Accounting
Generally, there are two main methods of recording financial transactions in the
books of accounts:-

1. Cash system: Under this system of accounting, financial transactions are not
recorded in the books until the related cash amount is actually received or paid.
This system does not make a complete record of financial transactions as it does
not record credit transactions and does not provide a true picture of profit and
loss at a point in time.

2. Accrual system: Under this system of accounting, financial transactions are

recorded in the books of accounts as and when it accrues during the period. This
system gives a complete picture of financial transactions entered during the
period as it makes record of all the transactions entered during the period
irrespective of cash received or paid.

Meaning of Accounting 1