Sign Up

Have an account? Sign In Now

Sign In

Forgot Password?

Don't have account, Sign Up Here

Forgot Password

Lost your password? Please enter your email address. You will receive a link and will create a new password via email.

Have an account? Sign In Now

Sorry, you do not have a permission to ask a question, You must login to ask question.

Forgot Password?

Need An Account, Sign Up Here
Sign InSign Up

asquestions

asquestions

asquestions Navigation

  • Home
  • About Us
  • Browse By Category
    • Agriculture
    • Animal & Pet
    • Cities
    • Education
    • Finance
    • Health
    • Insurance
    • Lifestyle
    • Location
    • Real Estate
    • Science & Technology
    • Travel
    • Work
  • Communities
  • Contact Us
Search
Ask A Question

Mobile menu

Close
Ask a Question
  • ABOUT US
  • CONTACT US
  • DISCLAIMER
  • PRIVACY POLICY
Home/ Questions/Q 377
Next
In Process
Asquestions Author
Asquestions Author

Asquestions Author

  • Cape Coast, Ghana
  • 339 Questions
  • 81 Answers
  • 14 Best Answers
  • 2k Points
View Profile
  • 0
Asquestions AuthorAdministrator
Asked: August 22, 20202020-08-22T14:17:21+00:00 2020-08-22T14:17:21+00:00In: Accounting

What is Accounting

  • 0

what is Accounting in the process of recording financial transactions pertaining to a business?

accountingwhat is accouting
  • 1 1 Answer
  • 1k Views
  • 0 Followers
  • 0
Answer
Share
  • Facebook

    Related Questions

    • What are the books of account used in public sector accounting
    • Public sector organization meaning
    • Procurement meaning
    • Public sector accounting Malaysia
    • Disadvantages of public finance

    1 Answer

    • Voted
    • Oldest
    • Recent
    1. Asquestions Author

      Asquestions Author

      • Cape Coast, Ghana
      • 339 Questions
      • 81 Answers
      • 14 Best Answers
      • 2k Points
      View Profile
      Eric Adjei Administrator
      2020-08-22T14:18:48+00:00Added an answer on August 22, 2020 at 2:18 pm

      Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing and reporting these transactions to oversight agencies, regulators and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company’s operations, financial position and cash flows.

      Sorry, the video player failed to load.(Error Code: 100013)

      Accounting

      How Accounting Works

      Accounting is one of the key functions for almost any business. It may be handled by a bookkeeper or an accountant at a small firm, or by sizable finance departments with dozens of employees at larger companies. The reports generated by various streams of accounting, such as cost accounting and managerial accounting, are invaluable in helping management make informed business decisions.

      KEY TAKEAWAYS

      • Regardless of the size of a business, accounting is a necessary function for decision making, cost planning, and measurement of economic performance measurement.
      • A bookkeeper can handle basic accounting needs, but a Certified Public Accountant (CPA) should be utilized for larger or more advanced accounting tasks.
      • Two important types of accounting for businesses are managerial accounting and cost accounting. Managerial accounting helps management teams make business decisions, while cost accounting helps business owners decide how much a product should cost.
      • Professional accountants follow a set of standards known as the Generally Accepted Accounting Principles (GAAP) when preparing financial statements.

      The financial statements that summarize a large company’s operations, financial position and cash flows over a particular period are concise and consolidated reports based on thousands of individual financial transactions. As a result, all accounting designations are the culmination of years of study and rigorous examinations combined with a minimum number of years of practical accounting experience.1

      While basic accounting functions can be handled by a bookkeeper, advanced accounting is typically handled by qualified accountants who possess designations such as Certified Public Accountant (CPA) or Certified Management Accountant (CMA) in the United States.2 3 In Canada, the three legacy designations—the Chartered Accountant (CA), Certified General Accountant (CGA), and Certified Management Accountant (CMA)—have been unified under the Chartered Professional Accountant (CPA) designation.4

      The Alliance for Responsible Professional Licensing (ARPL) was formed during August 2019 in response to a series of state deregulatory proposals making the requirements to become a CPA more lenient. The ARPL is a coalition of various advanced professional groups including engineers, accountants and architects.5

      Types of Accounting

      Financial Accounting

      Financial accounting refers to the processes used to generate interim and annual financial statements. The results of all financial transactions that occur during an accounting period are summarized into the balance sheet, income statement and cash flow statement. The financial statements of most companies are audited annually by an external CPA firm. For some, such as publicly traded companies, audits are a legal requirement.6 However, lenders also typically require the results of an external audit annually as part of their debt covenants. Therefore, most companies will have annual audits for one reason or another.

      Managerial Accounting 

      Managerial accounting uses much of the same data as financial accounting, but it organizes and utilizes information in different ways. Namely, in managerial accounting, an accountant generates monthly or quarterly reports that a business’s management team can use to make decisions about how the business operates. Managerial accounting also encompasses many other facets of accounting, including budgeting, forecasting and various financial analysis tools. Essentially, any information that may be useful to management falls underneath this umbrella.

      Cost Accounting

      Just as managerial accounting helps businesses make decisions about management, cost accounting helps businesses make decisions about costing. Essentially, cost accounting considers all of the costs related to producing a product. Analysts, managers, business owners and accountants use this information to determine what their products should cost. In cost accounting, money is cast as an economic factor in production, whereas in financial accounting, money is considered to be a measure of a company’s economic performance.

      Requirements for Accounting 

      In most cases, accountants use generally accepted accounting principles (GAAP) when preparing financial statements in the U.S. GAAP is a set of standards and principles designed to improve the comparability and consistency of financial reporting across industries. Its standards are based on double-entry accounting, a method in which every accounting transaction is entered as both a debit and credit in two separate general ledger accounts that will roll up into the balance sheet and income statement.

      Example of Accounting

      To illustrate double-entry accounting, imagine a business sends an invoice to one of its clients. An accountant using the double-entry method records a debit to accounts receivables, which flows through to the balance sheet, and a credit to sales revenue, which flows through to the income statement.

      When the client pays the invoice, the accountant credits accounts receivables and debits cash. Double-entry accounting is also called balancing the books, as all of the accounting entries are balanced against each other. If the entries aren’t balanced, the accountant knows there must be a mistake somewhere in the general ledger.

      History of Accounting

      The history of accounting has been around almost as long as money itself. Accounting history dates back to ancient civilizations in Mesopotamia, Egypt and Babylon. For example, during the Roman Empire the government had detailed records of their finances.7 However, modern accounting as a profession has only been around since the early 19th century.

      Luca Pacioli is considered “The Father of Accounting and Bookkeeping” due to his contributions to the development of accounting as a profession. An Italian mathematician and friend of Leonardo da Vinci, Pacioli published a book on the double-entry system of bookkeeping in 1494.8

      By 1880, the modern profession of accounting was fully formed and recognized by the Institute of Chartered Accountants in England and Wales.9 This institute created many of the systems by which accountants practice today. The formation of the institute occurred in large part due to the Industrial Revolution. Merchants not only needed to track their records but sought to avoid bankruptcy as well.

      Compete Risk Free with $100,000 in Virtual Cash

      Put your trading skills to the test with our FREE Stock Simulator. Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money. Practice trading strategies so that when you’re ready to enter the real market, you’ve had the practice you need. Try our Stock Simulator today >>

      • 0
      • Share
        Share
        • Share on Facebook
        • Share on Twitter
        • Share on LinkedIn
        • Share on WhatsApp

    You must login to can add an answer.

    Forgot Password?

    Sidebar

    Stats

    • Questions 1k
    • Posts 176
    Ask A Question

    Browse By Category

    • Agriculture
    • Animal & Pet
    • Cities
    • Education
    • Finance
    • Health
    • Insurance
    • Lifestyle
    • Location
    • Real Estate
    • Science & Technology
    • Travel
    • Work

    Related Questions

    • haxorbaba95

      What are the books of account used in public sector

      • 0 Answers
    • haxorbaba95

      Public sector organization meaning

      • 0 Answers
    • haxorbaba95

      Procurement meaning

      • 0 Answers
    • haxorbaba95

      Public sector accounting Malaysia

      • 0 Answers
    • haxorbaba95

      Disadvantages of public finance

      • 0 Answers

    Recent posts

    • Asquestions Author

      How to Get 11 Pet Insurance Ideas – Amazing Method

      • 0 Comments
    • Asquestions Author

      Excellency Progressive Pet Insurance 2022

      • 0 Comments
    • Asquestions Author

      10 Secrets for Finding the Right Pet Insurance

      • 0 Comments
    • Asquestions Author

      8 Questions You Should Ask About Pet Insurance Before Buying

      • 0 Comments
    • Asquestions Author

      7 Simple Changes That Will Make a Huge Difference with

      • 0 Comments

    Explore

    • Recent Questions
    • Questions For You
    • Recent Posts
    • New Questions
    • Favorites Questions
    • Most Visited Posts
    • Agriculture
    • Accounting
    • Animals
    • Business
    • Company
    • Education
    • Entrepreneurship
    • Health
    • Investment
    • Technology
    • Mtn
    • Snowing

    Footer

    • ABOUT US
    • CONTACT US
    • DISCLAIMER
    • PRIVACY POLICY

    © 2020 Asquestions.com All Rights Reserved