ACCOUNTING
The history of accounting goes back to the ancient times of Vedic
ages in the eastern hemisphere and ancient Mesopotamia to
about 3500 B.C and the evolution of accounting process refers
to the invention of double entry book keeping process that
commenced with Luca Pacioli. After the first royal charter
was granted to the Society of Accountants in Edinburgh in
1904, the process and techniques of accounting took a jumpstart.
Accountancy, as a profession however saw the day light another
50 years back in 1854.
Today, knowledgeable accounting professionals exceed a million
around the world with a majority of them coming from United
States and United Kingdom.
Accountancy is basically related to maintenance of records relating to property and property rights, wealth, interchange of goods, regulating credit, dealing with the common denominator for exchange, i.e, and money, virtually everything. Accounting basically refers to arithmetic and calculations and balancing the assets and liabilities on one hand while debit and liabilities on the other.
Necessity for a double entry book keeping and accounting
process arose when Governments found it necessary to maintain
records properly including the receipt and balances. The encyclopedia
Britannica defines accounting as "systematic development and
analysis of information of an organization". Accounting has
various wings.
The recording of financial transactions that takes place
in an organization is called Book Keeping. On the other hand
maintaining a record about the assets and liabilities, debits
and credits and their comparative analysis in accounting is
termed as financial accounting. This part of accounting process
is also known as Balance Sheet since it shows the actual balance
of the company whether it is incurring loss or profit. When
the accounting report indicates loss for an organization it
is a negative balance sheet, otherwise it is a positive balance
sheet.
An integral part of accountancy is audit which is meant to find out mistakes and irregularities committed in maintenance of accounts and use of resources and this streamlines the use of money and resources acting as a necessary check and balance on wasteful expenditures.
Another important part of accounting process is preparation
of the budget and financial statements. The budget indicates
the expected income and expected expenses to be incurred by
the company and the accounting system examines and finds out
whether the budget is a surplus or a deficit one. In accounting
process a budget that shows expected expenses to be less than
expected income, it is called a surplus budget.
When through this accounting process the income and expenditures
are shown to be even, it is called a balanced budget and when
the accounting process indicates in a budget that the expenses
are more and income is less, it is called a deficit budget.
The important part of the accounting process is to keep the
track of investments made and income derived. Finally, the
accounting process gives an overall picture of the organization
relating to its financial stability.
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