Unit-1 Basic Concepts Of Accounting

In this unit we intend to have an overview of Accounting and discuss its nature, scope and importance.

What is Accounting?

Answer

The recording of business transactions in a systematic manner is the main function served by accounting. Whichever the form of business organization-a sole proprietorship, a partnership, a company, or a co-operative society-it has to maintain proper accounts. He accounting information is useful both for the management and the outside agencies like tax authorities, banks, creditors etc.
The management needs it for purposes of planning, controlling and decision making. The banks and creditors require it for assessing the credit worthiness of the business and the tax authorities use it for determining the amount of income tax, sales tax, etc.
In fact, accounting is necessary not only for business organizations but also for non-business organizations like schools, colleges, hospitals, clubs etc.