The Focus Of This Assignment Is To Understand Accounting

1070 WordsApr 7, 20175 Pages
The focus of this assignment is to understand accounting terms, importance of accounting and reporting and how accounting and reporting take place in the business entity. It is also aimed to find out the flow of accounting information from the beginning to the end. And to understand accounting standards and principles. Accounting can be defined as a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. Accounting reveals profit or loss, and the value and nature of a firm 's assets, liabilities and owners ' equity at a given period of time. There are two methods of accounting, accruals accounting and cash accounting. Cash accounting reports…show more content…
Financial transactions which are carried out on credit are recorded in the Day book with date and the amount. They are often divided into sales day book and purchase day book. Transactions are recorded chronologically and they are posted to ledger directly or through the journal. Journal entry can be both used as prime book of entry or secondary book of entry. It helps arranging the same nature of transactions together and it shows transactions to be posted to debtor or creditor side of the relevant ledger account. Ledger account is called primary books or principal books of account because from the balance of ledger accounts trail balance and final account are prepared. It is also called the secondary books of accounts because it is subsidiary to the journal and is prepared based on the journal. Ledger account has separate T accounts where particular nature of transactions can be posted. Bills, invoice and other documents that support the transactions are kept for certain time period for future references. Records are made with date and the amount when they occur. They are expressed in terms of numerical values. The transactions recorded are supported by documents. Audits are performed by internal auditors for recorded transactions for authenticity, and to see whether they are carried out following prescribed accounting standards. Reports are prepared and audited by external

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