NATURE of Accounting

By nature, Accounting is both an ART and a SCIENCE. ART means imaginative skill of expression of objects by applying creativity to it. We apply the same creativity of thinking in accounting as artist do. Accountants use creative skills and imaginative ways of gathering quantitative information and converting the financial data into presentable, readable and understandable financial reports so that users whether accountants and non-accountants alike can draw meanings from them and make judgments and decisions. Since some of the users of financial reports are non-accountants, the accountants who prepared the report must be able to present the report in a format easily understood in layman’s terms. And, these require artful skills and creative thinking. Thus, ACCOUNTING is an ART. Applicably, accounting is also a SCIENCE. By definition science means a branch of knowledge requiring systematic study and method. And, accounting is just so. Students of Accountancy shall apply systematic study and method as they go along especially in higher accounting subjects. Accountants do the same in their practice of accounting. They based what they do according to principles, conventions and standards of Accounting. Hence, ACCOUNTING is a SCIENCE. By nature, Accounting is a PROCESS and an ACTIVITY. Accounting operates on various step-by-step PROCESSES and ACTIVITIES inside the entity, to wit: 1.Identifying, recording and classifying transactions and events. 2.Measuring in terms of money the transactions and events which are in part at least of financial character. 3.Summarizing in a significant manner the transactions and events 4.Communicating economic information to permit informed judgments and decisions by users of information. 5.Interpreting the results thereof. By nature, Accounting is a DISCIPLINE and a SERVICE. DISCIPLINE means orderly and controlled behavior. It also means training which corrects, molds, or perfects the mental faculties or behavior. Consequently, Accounting has its own sets of standards and professional ethics to follow. In order to come up with reliable and credible financial reports, those in the accounting practice are guided by rules, procedures, principles, conventions, methods and standards. Those practicing accounting undergo years of training which began in their college days and continuously being taught after graduation and updated by various authorities thru seminars, workshops and lectures. SERVICE is defined as act of serving or help given to others. Accounting is a SERVICE. Accounting is a form of help to users of financial information and financial reports. Accounting serves by providing assistance through financial reports about the financial affairs of the business. By nature, Accounting is the REPORT CARD of the business. In schools, the performance standing of students and the progress of the students are communicated and reflected thru their report cards. Likewise, the progress or performance and financial standing of entities are reflected in the Financial Statements and Financial Reports. Financial Statements and Financial Reports help the owners of the entities and interested parties to understand the financial standing of the business and how the business is performing and progressing.

Researched by WBBBB Accounting & Management Services. Click & visit our internet site: http://wbbbb-ams.blogspot.com/ ▪ Email us: wbbbb.ams@gmail.com ▪ Call/Text CP: 0917 767 78 56 / 0908 741 97 42 ▪ Call DL: 378 54 04 Services Offered: ▪ Business Registration ▪ Management Advisory Services ▪ Accounting/Bookkeeping ▪ Tax Advisory/Services ▪ Loans/Projects Proposals ▪ External Auditing ▪ Tax Returns ▪ Payroll Computation Services ▪ Financial Statements ▪ Financial Reports ▪ Assistance to SEC, BIR, SSS, Pag-ibig, Phil-health, etc ▪ Tutorials, Training or Consulting Services

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Accounting help owners and interested parties answer questions or issues like the following:

• Profitability: How much the company earned or how much is the increase in the

capital or how much the business profited as a result of its operation? • Liquidity: Is the availability of funds sufficient to finance business operations? • Stability: Can the business continue as a going-concern? Can the business sustain the operations in the long run? Can the business sustain long-term cash flow and profitability? • Solvency: Can the entity pay long-term debts or obligations to others? • Capital Structure: How much borrowed and contributed capital are invested in the entity?

By nature, Accounting is the LANGUAGE of business. Businesses are very much dependent to financial data and financial reports. It is through the financial data and financial reports where businesses and entities communicate. Hence, accounting serves as the medium of communication in terms of the financial standing of entities. Thru the Accounting Information System is the way Accounting communicates. The financial affairs of the entities are identified, recorded and measured thru the journalizing and posting processes of the Accounting System. The recorded transactions and events are then processed further by the system. They are consolidated and summarized and communicated thru various financial reports. These financial reports are those presented or provided to users for business study and decision-making. We may infer that accounting may be thought of as a “special language” or as a “business language” used to communicate or convey financial information about an entity to those who wish to use the information to make study and decisions. Financial Statements and Financial Reports convey financial information to users. By nature, Accounting is the SENSES of the business. Like the human body, accounting has many senses too. The EYES of the business is the Bookkeeping part of Financial Accounting. Bookkeeping is looking at the starting work of accounting or the recording phase of the accounting cycle. The bookkeeper or accountant looks at or identify first the transactions and events which must be recorded in the Books of Accounts. The EAR and (critical) EYES of the business is the Auditing branch of Accounting. Auditing looks or examines the veracity of financial records and truthfulness of financial reports, and detects frauds or irregularities. Auditors are the ears and eyes of the business because their job is akin to listening and looking into what is happening inside the organization. The BRAIN or HEAD and HEART of the business are Comptrollership or Management Accounting branch. Management Accounting involves in planning the business, know where it is going, and help the business stay as a going concern and drive the business to get where it targeted or planned to be. Like the head, it deals with planning. Like a heart, it feels or pulse for the business.

Researched by WBBBB Accounting & Management Services. Click & visit our internet site: http://wbbbb-ams.blogspot.com/ ▪ Email us: wbbbb.ams@gmail.com ▪ Call/Text CP: 0917 767 78 56 / 0908 741 97 42 ▪ Call DL: 378 54 04 Services Offered: ▪ Business Registration ▪ Management Advisory Services ▪ Accounting/Bookkeeping ▪ Tax Advisory/Services ▪ Loans/Projects Proposals ▪ External Auditing ▪ Tax Returns ▪ Payroll Computation Services ▪ Financial Statements ▪ Financial Reports ▪ Assistance to SEC, BIR, SSS, Pag-ibig, Phil-health, etc ▪ Tutorials, Training or Consulting Services

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