Accounting being a process involves a series of activities, what are the activities involved in accounting process?



Accounting is the process of identifying, measuring and communicating the economic information of an organization to various users who need the information for decision making.
Thus, accounting entails the following activities:
identifying transactions and events,
measuring, recording, classifying, summarising, analyzing,
interpreting and communicating.

Identifying the transactions and events: Accounting identifies transactions and events of a     specific entity. A transaction is an exchange in which each participant receives or scarifies value (for example sale of goods  for cash or on credit). It involves exchange of goods and services on      cash or credit basis. An event is a happening of consequence to an entity (eg. Use of raw          material for production.

Measuring the identified and events: It involves the measurement of transactions and events in monetary terms.

Recording: It is concerned with recording of transactions and events in orderly manner in books of original entry.

Classifying: It is concerned with grouping recorded transactions of similar type at one place so as to be most useful to the business. This activity is performed by maintaining the ledger in which different accounts are opened. All related transactions are brought to one place by            posting. For example, all sales of goods for or on credit on different dates are brought to sales            account.

Summarizing: It involves the periodic preparation of financial reports or statements such as Income Statement and Statement of Financial Position popularly known as Balance Sheet.

Analysing: This is concerned with establishment of relationship between the various items or       group of items taken from either Income Statement or Statement of Financial Position or both. The purpose of analysis is to identify the financial strengths and weaknesses of the business. It           provides the basis for interpretation.

Interpreting: It is concerned with explaining the meaning and significance of the results produced by the analysis of financial reports or statements

Communicating: This is concerned with the transmission of summarized, analysed and interpreted information to the users to enable them to make decisions.







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