What is Accounting?
Accounting is the process of measuring and recording all the financial transactions that happened in a financial year. It includes summarizing, analyzing and recording the data. It helps in getting a clear picture of the financial position of the business by seeing the value of a company’s assets and liabilities.
Accounting is considered to be a discipline that is based on many different terms, rules, principles and standards, which are needed to be followed to obtain the required information for the decision-making process.
Accounting consists of some basic terms:
- Summarizing the data: In this step, all the financial transactions are recorded and summarized at one place.
- Analyzing the data: After summarizing the data, different specialists analyze the data.
- Interpreting the data: After the analysis of the data has been completed, the interpretation of the data is done. In this step, all the information collected from the previous steps is forwarded.
- Communicating the information: After the successful completion of the above steps, the information which is required by the different investors and other business entities is communicated to them.
Difference between Bookkeeping and Accounting
Bookkeeping and Accounting are two different processes in Accountancy. They are the two fundamental aspects of financial management, but they serve different purposes and involve different tasks. Bookkeeping is the process of systematically maintaining records or books of accounts of an organization. However, Accounting is the process of measuring and recording all financial transactions of a financial year.
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