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unit-1-basic-concepts-of-accounting

Unit-1 Basic Concepts Of Accounting

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

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List the activities involved in Accounting?

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Learning Pundits Content Team

Written on Apr 16, 2019 10:52:01 AM

  1. To maintain systematic records: Accounting is used to maintain systematic record of all financial transactions like purchase and sale of goods, cash receipts and cash payments, etc. It is also used for recording various assets and liabilities of the business.
  2. To ascertain net profit or net loss of the business: A businessman would be interested in periodically finding the net result of his business operations i.e., whether the business has earned profit or incurred some loss. A proper record of all, income and expenses helps in preparing a Profit and Loss Account and ascertain the net result of business operations during a particular period.
  3. To ascertain the financial position of the business: The businessman is also interested in ascertaining the financial position of his business at the end of a particular period i.e., how much it owns and how much it owes to others. He would also like to know what happened to his capital, whether it has increased or decreased or remained constant. A systematic record of assets and liabilities facilitates the preparation of a position statement called Balance Sheet which provides the necessary information.
  4. To provide accounting information to interested parties: Apart from owners there are various parties who are interested in the accounting information. These are : bankers, creditors, tax authorities, prospective investors etc. They need such information to assess the profitability and the financial soundness of the business. The accounting information is communicated to them in the form of an annual report.