Accounting is used to keep a record of all transactions in the business. The accounting process includes summarizing, analyzing and reporting these transactions to oversight agencies, regulators and tax collection entities. It helps to handle all the documentation at a particular place. Accounting is a necessary function for decision making, cost planning, and measurement of economic performance measurement. Accounting process help to derive inference about the profit and loss transactions of the business. Accounting also helps organizations to plan their finances by developing budgets and forecasts.
CLASSIFICATION OF ACCOUNTING- i) Financial Accounting: This process help to develop the balanced sheets of a firm i.e. the net cash flow during a particular time period. These sheets are also called financial statements. This is important to develop by every organisation operating as it help to know the requirement of loan and net profits as a whole.
ii) Cost Accounting: It help to track down the production cost of the commodity on large scale. The difference between financial and coast accounting is that; In cost accounting, money is cast as an economic factor in production, whereas in financial accounting, money is considered to be a measure of a company’s economic performance.
iii) Managerial Accounting: A managerial accountant must be careful in communicating confidential information and to whom. They work with their managers to analyze and create a budget to meet the needs of the short and long-term goals of the organization.
iv) Tax accounting: As the name suggest, it help to track the annual tax reports to be given as income tax. This helps to reduce tax burden on the firm.
v) Public accounting: Public accounting refers to businesses that provide accounting advice to clients based on their needs. They can work in auditing, assist with tax returns, consult on procedures tailored to the installation of technology or computer programs and provide legal advice.
ACCOUNTING CYCLE- The summoning of all type of accounting gives us what we called an accounting cycle. It help the organisation to establish a system of check and balances.The sequence of steps starts when a transaction occurs and ends with its entry in financial reporting.
To have a successful business having a crucial knowledge of accounting is necessary.