Question

accounting processing methods

Answer 1

Answer :-

The function of accounting is to provide quantitative information, primarily of financial nature about economic entities that is needed to be useful in making economic decisions. Thus accounting may be defined as the process of recording, classifying, summarizing, analyzing and interpreting financial transaction and communicating the result to stakeholder.

The different process of accounting are as follows:-

1. Recording
2. Classifying
3. Summarizing
4. Dealing with financial transaction
5. Analyzing and interpreting
6. Communicating

1. Recording :-

This is the basic function of accounting. All the transactions are recorded in orderly manner. Recording is done in journal. This book may further subdivided into various subsidiary books such as cash journals, Purchase journal, sales journal etc.

2. Classifying :-

Classification is concerned with systematic analysis of the recorded data, with view to group transactions or entries of one nature at one place. The work classification is done in the book termed as Ledger. All expenses under these heads, after being recorded in the journal, will be classified under separate heads in ledger. This helps in finding out the total expenditure incurred under each of the above heads.

3. Summarizing

This involves presenting the classified data in a manner which is understandable and useful to the internal as well as external end-Users of accounting statements. This process leads to the following statements

1. Trial; Balance
2. Income Statement
3. Balance Sheet

4. Dealing with financial transaction

Accounting records only those transactions and events in term of money, which is the financial character. The transaction which are not financial character are not recorded in the books of accounts.

5. Analyzing and interpreting

The recorded financial data is analyzed and interpreted in a manner that the end- users can make a meaningful judgment about the financial condition and profitability of the business operation. The data used for preparing the future plan and framing of policies for executing plans

6. Communicating

The accounting information after being meaningfully analyzed and interpreted has to be communicated in a proper form and manner to the proper person. This is done through preparation and distribution of accounting reports, which includes besides the usual income statement and the balance sheet. The initiative, imagination and innovative ability of the accountant are put to test in this process