"I have started this chapter from the theoretical point of view. So, there need to introduce about the financial accounting. It is an important part of management organization to control over the resources. In another way we can say that to run a business entity depends upon many resources like – land, labour, capital and management along with many persons like – engineer, MBAs and accountant to find out the financial performance of that entity. In the conclusion we can say without accounting we can not communicate with the outside world. People says it is the language of business but I think it not necessary of only business activities but also, it is also important for non-business activities also like – accounting for charitable institution, accounting is school or family etc.
In an organization accounting broadly known for:
1. Cost planning and cost control on the evaluation of people and activities.
2. Brand, products and customer categorization.
3. Strategic and tactical decisions for managers
4. Financial statements to investors, government authorities and other parties through external reporting.
Our goal through the financial accounting concepts:
Concept of accounting
Meaning of Accounting Trail
Accounting equation
Now we will discussion on accounting concepts. Theories show that “Accounting was born without notice and reared in neglect.” I also admit that accounting was not theorized 1st it was practiced 1st.
The Entity Concept
For a business man his business is an artificial entity distinct from its proprietor(s). A business man can have their own real estate, accounts, an other assets and he can be in partnership, proprietorship or corporate entity but he is not the whole entity of all the accounts. There can be single or sole entity depends on the business and distribution.
Double Entry Accounting
The accounting term has been defined by the American Institute of Accountants which is now known as American Institute of Certified Public Accounts. According to that accounting was, “the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, an interpreting the results thereof.”
The main aspect of double entry is credit and debit. The crux of the matter of double entry is “each transaction has two aspect debit and credit equally”.
With the accounting process these sequences of activities process run:
Transaction/Event
Preparation of Vouchers
Recording in the Primary Books
Posting in the Secondary Books
Preparation of Trail Balance
Preparation of Presentation of Financial Statements
One more things have involved with the financial accounting that are financial statements that are the end products of the accounting process. In the financial statements balance sheet are main thing which contain three elements – Assets, Liability and Equity.
In the summary of the chapter I want to explain some financial terms that are:
The Accounting trail is the initial process of financial statements.
The Accounting Equation is the process of balance sheet of different elements.
Debit comes from the Latin word ‘debeo’ which meaning is ‘owned to me, the proprietor’.
Credit is also comes from the Latin word ‘credo’ which meaning is ‘trust or believe’.
These are the some main terms of financial accounting which commonly comes. Along with assets, liability, income, expenses and equity also involve in terms of financial accounting."
Source Via:Financial Accounting – An Introduction
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