Describe the major concepts in accounting
Answers
Answer:
In simple words, accounting can be defined as keeping records of all financial transactions related to an individual or an entity. And then there are pre-defined rules and procedures in the way a transaction should be accounted for. This is what we call debit or credit, income or expenditure, asset or liability.
1.Record keeping: The system of record keeping of financial transactions requires the use of standard set of accounting policies, practices and procedures, as well. It is concerned with the recording of transactions in an orderly manner, soon after their occurrence in proper books of accounts.
2. Tracking of financial transactions: In business organization, various transactions are entered and collection and analyzing of each such transaction needs separate accounting procedures.
3. Financial Reporting: Several reporting frameworks, most notably Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), etc. mandates a specific manner in which the financial transactions of a business organization must be reported and aggregated in the financial statements. This results in the preparation of Statement of Profit and Loss, Balance Sheet, Statement of Cash Flows along with the supporting disclosures.
Types of accounting
1. Cost accounting
2. Financial accounting
3. forensic accounting