Question

Define accounting. Explain its scope?

Answer 1

The meaning of accounting is broader than of book keeping. The book keeping is the first step of accounting. So, accounting hold book keeping in its fold. Accounting is the process of identifying, measuring, recording, classifying, summarizing, analyzing, interpreting the financial transaction and lastly, communicating to obtained result to is staffs.



Scopes of accounting


1.    Business

Accounting is widely applicable in the business sector. Today, in the modern world, most of the people are engaged in business sector and all businessmen follow Generally Accepted Accounting Principle (GAAP) to find out profit, loss and financial position of business firm.


2.    Government organizations

Though, Government organizations do not follow Generally Accepted Accounting Principle (GAAP), its keep systematic records of all transactions in order to find the position of public fund.


3.    Non-Government organizations

Non-government and service organizations such as NGOS, INGOs, Red Cross Society, SOS etc which plays a vital role in the development of nation also uses accounting. The accounting system used in these organizations are called fund accounting.


4.    Individuals

Individuals also perform economic activities to earn their livelihood. They also perform some form of accounting tos draw financial information for making personal economic decision.

Answer 2

For management to make decisions about the future of the firm they require relevant financial information. This is where accounting steps in. It is the language of business that records summarizes and analyzes all transactions and events of a firm.