Fundamentals of Accounting

Fundamentals of 

what is accounting 

Accounting 

Introduction

Commercial businesses run with the objective of earning profit, and financial transactions are the order of the day. It becomes essential for a business owner to keep a record of the business’income and expenditure, in order to find answers to numerous questions, a few of which are: -

Is the business earning profits or is it incurring a loss?

How much do third parties owe the business? 

How much does the business owe to third parties?

Can the business be expanded?

Should a specific operation be withdrawn?

What is the total value of business assets?

These answers can be arrived at, by studying the financial information of a business operation. Thus, accounting is an integral part of any business.

 Accounting is the practice of maintaining precise records of the financial dealings of a business. It involves identifying business transactions, recording them, and summarizing the same in such a way that important financial information can be communicated to the stakeholders of the business. Accounting is also called as language of business.

The stakeholders of a typical business concern are:

Owners  

Management  

Employees  

Investors (existing and potential)  

Suppliers  

Customers  

Lending institutions  

Government authorities