Accounting is the way companies as well as individuals who are engaged in business and enterprise, report and measure their own financial transactions. As a result of doing so, these businesses can easily at a particular point in time and also over a fixed period of time, be able to look at their performance and success. The fundamental process associated with processing this information is defined as book keeping, which at its elementary level entails creating an equivalent and opposing entry in the journal pertaining to each transaction in order that the entire set of financial records always balances. These two entries are known as debits and credits.
Computerisation of bookkeeping has made the complete method of posting transactions and producing reports a lot simpler and easier to carry out. This has trimmed down a lot of of the more tedious functions that were part of the job in the past. As soon as all the actual financial transactions for a specific period are documented, posted and up to date, the accountant can then look at his set of accounts and get an accurate illustration of exactly how the company has performed. The statement that shows this is known as a profit and loss statement and as its title suggests, indicates if the organization has recorded a profit or sustained a loss. The other important accounting report is called a balance sheet. This is a snapshot at a specific point in time and presents the assets and liabilities of a company and is a very good indicator of its economic well being.
Accounting and finance is a really complex topic and has a variety of facets to it. In sizeable businesses the diverse functions will have a number of people working in them for the reason that the sheer amount of transactions would be much too much for just one accountant to deal with. Generally there’ll be an accounts receivable department which bills for the services or goods that the organization has sold and who will also make certain that those bills are paid in a timely manner. In turn there will be the accounts payable section who will process the bills for goods and services that the business has purchased and ensure those are settled once they become due. There may well be separate credit and purchase ledger controllers, management accountants, taxation accountants, financial accountants and at the very top of the company financial function, the chief financial officer (CFO).
When asking the question precisely what is accounting, you can see that it lies at the very core of any enterprise that is engaged in business, be it a one man trader or a multi national conglomerate. By law and to adhere to statutory rules and tax authorities, an organization or trading individual is obligated to present a set of financial records that clearly discloses its financial status. Typically this is carried out on an annual basis and large organizations are additionally required by law to have their company accounts independently verified by a firm of auditors. The proprietors and or directors of a company are required to select suitable accounting policies, implement them consistently, make judgements and estimates which are sound and prudent, and prepare the company accounts on a going concern basis. This is so shareholders and other interested parties can be completely satisfied that the set of accounts the company provides, are a fair and accurate representation of the state of affairs of the company.
If you are considering going into the accounting and finance profession or just wish to learn more about the way it works, then I hope this article will help you find what you are looking for.