Question

four aspects of accounting and define and provide example of each

Answer 1

Four aspect of accounting :

• Recording
• Classifying
• Summarizing
• Interpreting

(1) RECORDING

Recording involves record all business transactions in systemically and chronologically way. Journal entry used to record transaction.

Example: Sale of goods for cash and record it with amount, value, description of goods, name of customer, date of transaction.

(2) CLASSIFYING

Classifying involves break all recording items into different categories in the ledger. All assets, liaabilities, and equities have their classification.

Example: Classification of assets into tangible and intangible assets, further classification of tangible assets into plant and machinery, land and building ,equipment etc.

(3) SUMMARIZING

Summarizing involves summarize the data after the end of accounting period such as a month, quarter or year.

In summarizing data are presented in a comprehensive way , which is easily understand by their users both external and internal users.

Example: Income statement and balance sheet.

(4) INTERPRETING

Interpreting involves explaining or reframing of financial statement in a language which is comprehensive and reliable to users of financial statement, so that users be able to understand and rely on the financial position of the company and its stability and growth potential.

Example:FASB ( Financial Accounting Standards Board ) that follow GAAP (General Accepted Accounting Principles) to promote financial reporting that provide useful information to the users.

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