The systematic recording, reporting, and analysis of financial transaction of a business are meant by accounting. The person in charge of accounting is known as an accountant, and this individual is typically required to follow a set of rules and regulations, such as the Accounting Principles. Accounting allows every company to analyze the financial performance of the business, and look at statistics such as net profit.
Elements of Accounting:
Accounting involves two main elements and activities:
An information process that identifies, classifies and summarizes the financial events that take place within an organization and
A reporting system which communicates relevant financial information to interested persons which allows them to assess performance, make decisions and control the economic resources in the organization.
Accounting is very important for an "information process" that serves several purposes:
Distinguish a BOOKKEEPER and an ACCOUNTANT?
The two terms of bookkeeper and accountant are used so often and interchangeably when dealing with the finances aspects of a business, that most people think they each do the same function. The reality is that they are two quite distinct roles requiring two quite distinct skill sets.
Bookkeeping in large part is recording financial transactions whereas the accountant function is results oriented. Most bookkeepers will manage the accounting process up to the ‘Trial Balance’ stage. A ‘Trial Balance’ is an internal summary report created by the accounting process that ensures a fundamental concept in accounting has been accurately applied in the recording of the financial transactions. This process is called ‘double entry book keeping’.